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“Generally, it seems people don’t go to jail for financial crimes, they pay fines,” Stewart told Gensler during an interview last year. He pointed out that members of the subreddit WallStreetBets, who call themselves “apes,” had organized their own movement for change.

“The apes exposed something really interesting. They crowdsourced a way of rooting out corruption.”

Stewart believes this movement could pave a path to change on Wall Street — here’s how to level the playing field against a Goliath even when you’re just an average David.

Changing the rules

During the Stewart interview last year, Gensler, a former Goldman Sachs investment banker, admitted that the financial system was far from a “level playing field.”

However, he went on to list examples of what his team is trying to do to change that. The SEC has proposed a new best-execution rule and mandates for broker disclosures that could overhaul the way stocks and financial instruments are traded on capital markets across the country.

But brokers, lobbyists and hedge fund managers such as Citadel Securities’ Ken Griffin have already pushed back on these new rules.

And for his own part, Gensler made it clear that the SEC can propose changes but it’s up to Congress to write new laws. Additionally, in multiple interviews, he has stated the agency could use additional resources to carry out its mandate.

So short of government intervention, here’s how savvy retail investors without a “VIP pass” can gain an edge.

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Leveraging advantage

Retail investors may not have the financial resources, advanced algorithms or favorable regulatory treatment of Wall Street’s elites. But they do have a few key advantages over the pros.

  • Flexibility: Retail investors aren’t restricted by the mandate of a committee or limited partners. Unlike hedge funds and pension funds, the average investor can invest in any asset class in nearly any country across the world.
  • Domain expertise: Unlike professional investors, retail traders have day jobs in different industries. This gives the average investor insider knowledge about a specific industry. For instance, a truck driver may know more about the value of autonomous driving and logistics software than a banker who studied finance at a top business school; the trucker in this case has valuable grassroots knowledge.
  • Longer timeframes: Hedge funds and money managers must report their numbers every quarter. Unlike professionals, retail investors can remain invested in the market for decades, even during downturns, as they don’t have to report their performance or face redemptions from shareholders.
  • Lower costs: The legal and operational costs of running a hedge fund range anywhere from $75,000 to $150,000 annually. Costs can easily surge higher if the hedge fund hires multiple employees or operates in different jurisdictions. Meanwhile, a retail investor can simply put their savings in an ultra-low cost index fund. This cost advantage is usually underrated and if the market goes up the index fund does, too.

In other words, getting a leg up on Wall Street doesn’t cost an arm and a leg — or require you to outrun the big dogs.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.


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