Recently, I read two superb takes on whether retail investors have any meaningful edge.
Geoff Gannon generalized the discussion with a broader notion of “edge”.
He argues that unlike a casino, the stock market inherently has a positive edge. If you spend infinite time in a casino, you will go bankrupt. If you spend infinite time in the stock market, you will end up extremely wealthy.
So at the base level everyone in the market has an edge over those on the outside. This is a generic edge.
Then, there is the special edge.
Since buying certain kinds of stocks (high quality businesses, cheap stocks, and stocks rising in price) works better than buying other kinds of stocks (low quality businesses, expensive stocks, and stocks falling in price) an investor who systematically bets in order to maximize certain factors (like high quality, good value, and positive momentum) has an edge over both operators who systematically bet in order to maximize other factors (low quality, poor value, and negative momentum) and operators who don’t bet systematically.
And finally there is the stock-pickers edge, which Nate talks about.