When Anton and I manage wealth at Up Capital Management, one of the many barometers we follow is the buying and selling activities of institutional and professional investors (typically multi-million and billion dollar portfolios).  Also, we monitor how individual retail investors, who tend to have small account balances (well below a million dollars), react with their buying and selling activities.  Not surprising, there is quite a contrast between these two groups as to when they are increasing or decreasing risk in their portfolios.


From the graphic above, one can see the behavioral divergence between Institutional vs. Retail investors from 2007-2014. The differences in strategy could not be more clear when we look closely at March 8, 2009, the official start of the current bull market run, and onward. From the graphic below, one can see that the behavioral divergence between Institutional vs. Retail investors from 2015-2016 has not changed in any dramatic amount compared to previous years.


The Institutional investors significantly increased their stock holdings (inflow of new dollars) while the retail investors continued to sell (outflow of dollars).  Most startling is to observe how retail investors increase the pace of their selling almost as the momentum of the stock market increases.  Since March 2009, the S&P 500 has increased over 214% (see chart below) as retail investors have sold almost the same amount of stocks as institutional investors have bought.

^SPX Chart

One distinct difference between institutional and retail investors is a sound investment policy that defines goals, objectives, and most importantly loss tolerances.  Few if any retail investors have well-defined investment policies and most buying/selling decisions are based on emotion rather than clear strategies.

What Does This Mean to Me?

As you review your September statement we challenge you to ask yourself, “Is my self-directed portfolio achieving my goals and getting me closer to my retirement goals?”  If you have been only a reader of our content thus far, we say thank you. We extend an offer for you to join our exclusive content by clicking the “CONTACT US” button and sending me a direct email!