warren buffet says, it's easier to make larger gains with smaller money

Z

z32000

warren buffet says, it's easier to make larger gains with smaller money...
and harder with large amounts of money...

can anyone try to guess or elaborate on this... is he just refering to excess volume? are hedge fund managers allowed to throw all their money into one stock or futures at one time and get out within seconds...

I'm making good money in futures....I wonder if I had a lot more money to play with, would it be a lot harder to execute my orders with larger contracts?
 
Quote from z32000:

warren buffet says, it's easier to make larger gains with smaller money...
and harder with large amounts of money...

can anyone try to guess or elaborate on this... is he just refering to excess volume? are hedge fund managers allowed to throw all their money into one stock or futures at one time and get out within seconds...

I'm making good money in futures....I wonder if I had a lot more money to play with, would it be a lot harder to execute my orders with larger contracts?
More...

It's all a question of liquidity. And you don't have to be managing billions to run into this problem.

For example, assume that I am trading a stock (ticker ABCD) and want to buy it now at $32.15 per share, with an expected return of $0.02 per share (based upon past trading experience and/or valid backtesting with the strategy being used). If I'm trading 200 shares, I easily buy at 32.15, and subsequently (on average) sell some time later at 32.17, and make $4 profit minus a few commission fees.

However, if I wanted to buy 20,000 shares of that stock the result would be decidedly different. While I might get the first few hundred shares long at 32.15, I might have to chase the stock up to 32.45 to get my full 20,000 shares, perhaps averaging 32.30 per share. When my sell point comes, I might get a few hundred (or thousand) shares at my intended price, but to fill the full 20,000 shares I will end up pushing the price down based upon my own selling, and my average sell price might be 32.05.

The final result? Despite the identical buy and sell times but due to my much larger trading size, I lost $0.25 per share, or $5000 on the same trade that would have netted a profit on the smaller scale.

Trading large size is much, much more difficult than trading small. It is an excellent advantage that retail traders typically have over hedge funds.

-Eric
 
A major fund family used to play that game all the time. In 1982, August maybe, the market took off and ran until May or June of the next year. You could not get the public near the markets until May of 83. The fund gathered a small amount of money from insiders, and scored a 90% gain. In May, they advertised that "Special" fund, lured the public in, and killed them.

With small dough, you can accumulate a lot of smaller cap stuff, and score. O'Neil used to actually preach small floats in the 80's. Guess he got too big. But they do move - both ways.
 
warren buffet says, it's easier to make larger gains with smaller money...
and harder with large amounts of money...

can anyone try to guess or elaborate on this... is he just refering to excess volume? are hedge fund managers allowed to throw all their money into one stock or futures at one time and get out within seconds...

----------------------------------------------

- For each capital value exist different records

For 300 mln$ -600 mln $ in one year (clear it is one only in life )
in modern GDP relation Bruce Covner 100% FX

For one mln $ From 1 mln $ until 9 mln $ Martin Schwartz

For small capital 2000 $ suspect exist SEC accepted record
some 500%-10000% per month .But that would only one
month by one from 10000-50000 operators .
 
A lot of Buffets 70s and 80s investments were in arbitrage and distressed plays. Think CEFs at a huge discout. These are good for 50m or 100m each. But not for 5bln he's pushing now with each transaction.

That's what he means. Your universe of opportunities is larger when investing 10m than investing 10bln.
 
all about liquidity. Higher returns are definitely easier with small amounts... that's why us "small guys" have an edge, we can be a lot more nibble.
 
Quote from z32000:

warren buffet says, it's easier to make larger gains with smaller money...
and harder with large amounts of money...
More...

Of course...your options are much less when you have so much push/pull in a market. You can't enter or exit any position easily.
 
He is looking for someone to replace him when he finally dies.....as im sure he will die before he retires......

so what he is saying is there are alot of people that can make a decent return with a fund of 1 billion....he needs to find someone...or a group of someone's that can make that same type of return with 100 billion.

and try it for yourself....make a positive trade with 100 shares then make that same trade with 10,000 shares......it aint the same and it sure as hell aint as easy.

that is what he is saying
 
Quote from walterjennings:

give a person 10k and another 10m. who do you think will double their money first? obvious. its a matter of liquidity, opportunity and psychology.
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True, but warren buffet said it.
 
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