A Wealth of Common Sense: No, the Stock Market Is Not Rigged Against the Little Guy

The recent resurgence of “meme” stocks, and their quick drop back down, seems to indicate something is awry in financial markets. Video game retailer GameStop (GME) soared over 100% in just a few days on no real news, then came back down again.

Some see that as signs of retail investors run amuck. Others may see it as signs of manipulation by sophisticated funds and traders to extract money from retail investors. Where do things stand?

Chances are, markets aren’t rigged against the little guy. But the little guy is at a significant information disadvantage.

Full-time traders and analysts have a network and capital to tie into when looking for investment opportunities.

Historically, investors who simply stay the course will come out ahead over time.

Investors who hold onto a broad index of stocks for a seven-year period have seen gains 100% of the time. For one year, it’s just 79%. And on the daily level, it’s just 54% of the time.

Investors who feel burned may simply be suffering from the challenge of trying to outsmart the market.

If anything, since sophisticated traders need to make profits daily, retail investors may have an advantage. By thinking long-term, they have a higher likelihood of better profits.

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