I am an individual self directed investor, what chance do I have against well funded mutual fund investors? 

This question has kept a lot of retail investors from managing their own money and has funded wall street fee mafia mutual fund business.

Reality is, we, retail investors have a lot of advantage over the institutional investors. Here are a few of them : 

-Long term view: Individual investors have no peers to compare with and no ranking tables to climb each quarter. So they can plan for really long term.

-Letting your winners run : If a particular stock does too well and become big portion of fund, fund managers will sell it in name of diversification. So, instead of watering the winners, they’re trimming it. As individual investor you can define the concentration you are comfortable with.

-Tax efficiency : Mutual funds distribute capital gains even if you don’t sell your shares. Individual investors can control their taxable events 

-Flexibility: Individual investors can be more nimble and change the investment objective based on needs. Funds can’t change their investment objective without a huge regulatory burden

-Alignment of incentive: As an individual investor, you do good when your portfolio does good. Not necessarily the case with funds. Fund managers are compensated based on AUM. As long they have their assets, they make money, even if you lose.

-Skin in the game: For you, it is your own money, for fund manager it is other people’s money. Sure, a bad fund manager will lose the job, but will go to other fund house.

-Control your destiny: Individual investors are dependent on actions of others who may not best informed : Even if fund managers are prudent, long term focused their hands are tied if their investors are not. The best opportunity to invest is when the market is down, but if fund’s investors panic and redeem their investment, the fund manager can’t do anything. 

-Cost efficiency: Investing in mutual funds involve expense ratio. Average expense ratio for active mutual funds is between 0.50%  to 0.75%. These basis points when compounded over a long term, makes a huge difference.

-Can take concentrated positions: Many investment fund get favorable tax treatment from IRS on the condition that it will be diversified. Means, the sum total of the substantial holdings (each with 5% or higher allocation) will not be more than 50%. If it exceeds, like it has been because Mag7 have done exceptionally well, then the fund has to sell some of those exceptionally well doing stocks to bring the total to less than 50%. Funds are forced to cut their flowers when they should be watering it.

So, don't let your money advisor fool you into thinking you need to pony up huge fees to invest in the market.

Just invest in low cost index fund ETFs and chill

$VOO, $SPY, $VTI, $DIA,  $BND, $TLT