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Big institutional investors, venture capitalists "VCs" and fund managers like to compete and boast about their successes; however, many individual investors don't seem to realize the same level of gains. Why? Here we'll discuss five ways individual investors can beat big funds. Also, we'll discuss how an individual Canadian investors can generate better returns from their investments, and even beat the broker, big fund and VCs at the money game.
1. Partner Up
Stock brokers, venture capital firms, super-sized pension funds, private equity firms and even banks have greater success when they leverage other people's money to make big plays. They often put some of their own money into investments; however, they can also use the power of the crowdfunding to go after larger, more efficient and more profitable investments; like, commercial real estate deals.
Leveraging other people's money enables them to gain traction faster, net more and reduce risk. Partnering up with other like-minded investors with aligned interests can really help build and maintain a solid portfolio and performance.
2. Be Okay with Doing Nothing
There's a lot of truth to the saying, "doing less is doing more". Many managers feel they have to constantly make big trades in order to keep get noticed by their boss and to attract more investments to the company.
Some individual investors assume that being busy making trades is helping them generate better investment returns. It can be expensive, tiring and often counterproductive. There are times to move very swiftly, then sit back and let your investment do the work.
3. Go Low Fat on the Fees
Try to go low fat on the fees. Each commercial real estate investment will have some type of management or transaction fees associated with it, like insurance and property management fees. These fees are the cost of doing business so going low fat on the fees can add a lot more to you bottom line performance, even without generating wild returns. As an individual investor or a private investor you'll have a big advantage in having a leaner operation that requires less admin costs.
4. Forget the Rush for Big Stats
What inevitably sinks many of the most flamboyant fund managers and corporations is falling for the intense pressure to knock big wins out of the park at every quarterly and end of year report. The cost of propping up those short term €˜stats' with short term €˜tactics' is typically devastating in the long run. Just look at corporations like Walmart, Wells Fargo and Apple who have disgraced their clientele, employees and investors.
5. Don't Make Wild Bets
No investment is 100% risk free, nor is hiding money under your mattress. Though wild bets and chasing wild promises of returns with extreme levels of risk is more like playing roulette than investing, sometimes someone gets lucky. The most experienced VCs will tell you that out of 100 startup investments 1 might payoff. You might make 100x your investment on that one, but that just pays you back for all the other losses. It can be more profitable and less risky to search for proven investments that can produce income fairly quickly and pay for itself, plus offer solid collateral as oppose to the €˜closing your eyes and crossing your fingers' approach.
Individual investors don't have to settle for negligible returns or high risk deals today. In fact, they can beat the big funds and brokers if they make smart investments that replicate the best moves of these experts, while refusing to fall victim to the hype.