3 Classes of players in the Stock Market, which one are you?

[Dennis Ng]

Some of you might know that another of my stock investing sifu is called "Warren". (not Warren Buffett though).

He once shared with me that in his mind there are only 3 Classes of players in the stock market...and they are as follows:

Quote teaching by Warren:

In my mind there are 3 classes of players, and I've group them by their money status thus: Smart Money, Dumb Money and Big Money.

Smart money denotes all those players that have an edge (insiders, directors..), priviledged by positions (relatives, friends and influence peddlars..) or superior analytical skills (brokers, SI forumers, researchers, FMs..) These people are the class that I collectively note as Invisible Hands, or IH. They know more than most.

Dumb Money is the exact opposite. These are the lazy, weak hearted, slow-witted, or just plain ordinary folk that are less priviledged either by connections or knowledge. Most reckon themselves as speculators, but by their actions, are nothing more than gamblers, and lousy ones too.

Big money, I class as those pools of funds that are organised by activity (mutual funds, unit trusts, pension funds..), employment (house traders, stockists, hedge funds..) or personal benefits (organised syndicates, professional speculators..)

Now, I reckon it has become fashioned such that Smart Money will use Big Money to outwith Dumb Money. Why? Because they are there. You've heard it before: The stock market is the only legalised way for the smart and rich to rob from the ill informed, weak and poor. That is life, and such are the rules.

My personal task is to try and be among the first catergory of players -- smart money -- as many times as I possibly venture into the game. I do realise that when I take blind emotion-based punts (after all, I human too?) I fall into the last category -- dumb money -- and if I win, it is only because I got lucky. Its just one gamble that paid off, nothing more.

I do know this: Big Money's chief credo is to live to fight another day. By their action, and their sheer size, it is that class of players who cause the shifting tides for our markets. This was strongly highlighted by the 1997/98 Asian crisis, when Singapore was lumped and dumped together with our neighbours when big money got uncomfortable following the devalution of the Thai Baht.

What I'm trying to say is that one class of players, the IH was smart enough to see opportunity in crisis. They saw beyond the short-term pain and focused on the long-term outlook and knew that things would improve. IH set about the task of collecting stock, even as others were still screaming get out, get out!! The rest is history.

I hope by this posting, you can understand my stance and appreciate some of the notions I carry when I go stalking for IH. They exploit the situation, influence it by their pole position in the food chain, and laugh all the way to the bank. I'd like to be in that position more times than not.

Warren

End of Quote

[wemakebread]

Thanks Dennis for above sharing.

Hopefully, our community will grow in financial literacy, become smarter with our money and no longer be fodder (Dumb Money) for the big fishes.