Stock Exchange

Source: Flickr user Rafael Matsunaga

We've all at one point felt that the market was rigged against us. You buy a stock, and it immediately drops 10% for no apparent reason. Then some Wall Street hotshot goes on CNBC and explains why it is so obvious that the stock would drop. And of course the hotshot shorted the stock and made millions (or so he says).

Then the stories emerge of hedge funds being convicted of insider trading, investment banks willingly selling toxic securities, and global banks colluding to rig the interest rates that businesses and individuals pay on their loans.

In those moments, it's easy to lose your discipline and look for an easy way out. It's tempting to try to do what those Wall Street pros do: trade fast and trade often, using technical indicators and complex statistics you don't really understand.

I'm here today to encourage you to stay strong.

Wall Street can be an ugly place
Yes, sometimes the markets do seem rigged. We see the powerful entities at the top of the food chain, equipped with piles of cash, hundreds of analysts, and sometimes even inside information.

They trade from dark pools, using powerful computers and artificially intelligent algorithms to beat you to the best prices. They self-deal -- sell a deal to one client while betting against it with their own money. It's shady at best, it's unethical to be sure, and sometimes it's downright illegal.

We sit at our computers at home, armed only with a spreadsheet and a pile of corporate SEC filings.

They have armored tanks. We have a bow and arrows. How can we realistically compete?

How to beat Wall Street pros
You simply cannot compete by trying to copy their strategies and tactics. You don't have the resources, access, or team of lawyers to successfully make that work. It's not a fair fight.

To beat them, really, you shouldn't even compete with them. The real solution is to win by doing what they are not.

You don't have to trade every day or every week, much less every few seconds. So don't. Instead of trading stocks, invest in the ownership of businesses. 

You don't have inside information. But you do have more than enough public data to find and invest in truly great companies. Those companies will appreciate with or without Wall Street manipulation.

You don't have to meet return expectations by next quarter's end -- you just need to be ready when the time comes to retire in 10, 20, or 30 years.

You have an advantage on the market, and it has nothing to do with Wall Street
The dark pool traders use their supercomputers and complex math to find stocks that are mispriced by pennies. Their advantage is measured in milliseconds. 

Your advantage is measured in years. By following the lead of value investors such as Warren Buffett, Joel Greenblatt, and others, you can learn how to get rich by taking the long view. The foundation of Benjamin Graham's value-investing philosophy was understanding that "Mr. Market" doesn't always correctly price a stock, especially when you have a long-term investment horizon.

In other words, you can beat Wall Street professionals. You just have to stop playing their game.

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