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Institutions vs Retail Investors: Four ways to improve your investment mindset and approach

2022/3/1

The DeFi research team BowTiedBull acts as an institutional investor during the day and a retail investor at night. Drawing from their own experiences and lessons learned, they shared four perspectives on Twitter, highlighting the key differences between these two types of investors.

Table of Contents

Institutional Investors vs. Retail Investors

1. Time Horizon

Institutional Investors: Long time horizon, typically in the range of 5-10 years. The best funds are often built over decades, not just during a 3-6 month bull market.

Retail Investors: Treat each opportunity as the last chance, with a mindset of "If I don't act now, the bear market is coming!"

This mentality makes retail investors more susceptible to manipulation and is why many crypto projects run on unrealistic hopes and dreams. If people are eager to believe them, daydreams can easily be sold.

How to Improve: Establish multi-year plans and work consistently to attract new investment capital.

2. Experience

To raise external funds, a track record of past transactions is necessary. Fund managers have over 10 years of investment experience, with 2-5 years in the crypto space. Typical retail crypto investors have only been in the industry for a few months, with limited knowledge.

Following Twitter accounts or signal groups may make you money a few times, but it does not promote critical thinking, and most people end up losing money.

How to Improve: Choose the longer path. While others are chasing the next Twitter alert, understand the implications of these things.

3. Interpersonal Relationships

If you think crypto whales and traders conspire to make money, yes, that's how life works. "Interpersonal relationships" are crucial, and institutional investors deeply understand this.

It's essential to connect with other winners, share opinions. Fortunately, the crypto space has a significant advantage in this aspect. Everyone is anonymous on the blockchain, with almost nothing to lose. So, you can direct message anyone, ask anything, and maybe get a response or make a friend.

How to Improve: Publish content, share alpha, try to build something.

4. Expectation Management

Institutional Investors: Always focus on future expectations, try to understand what is about to happen, how the market will react and price accordingly, plan entry and exit conditions, and monitor and adjust viewpoints in real-time.

Retail Investors: Completely opposite to institutional investors. They believe when prices rise, it will continue to rise, and when it falls, it won't come back, and they sell assets. They lack beliefs and do not monitor the market. They often feel things are out of control and easily manipulated.

How to Improve: Write investment reports, plan entry and exit conditions, and monitor held assets.

Conclusion

The above perspectives may sound basic and obvious, but they make all the difference. Time horizon, experience, and interpersonal relationships affect investment expectations and help investors manage assets.

These elements will form an "advantage" over time, and these advantages are like a moat for investors, just like a company's competitive advantage.