Is the stock market rigged?


Investors have good reason to question whether the stock market is rigged. Technically, the answer is no, the stock market isn't being manipulated, but retail investors have to overcome some significant hurdles to be successful.

 Let's take a look at some of these factors that can help you overcome future market volatility.

Asymmetric information

Asymmetric information, also known as "misinformation," occurs when one party to a transaction has more technical knowledge. Although insider trading is illegal and unethical, it can give you an advantage in the marketplace. On the other hand, professional traders and institutional investors often have an informational advantage over their competitors.

In this information imbalance, the timing and distribution of information can be ignored. While the potential of the Internet to level the playing field is very clear, the fact is that some institutional clients know the results of the information before the general investor public. Research departments and teams of traders are common in this type of brokerage.

Access to capital

Retail investors face a huge capital disadvantage. If you're not familiar with how exchanges work, pretend you run a small grocery store and get a lot of orders for lighters for resale. You call your dealer for a quote. Another major retailer called the same retailer to ask for thousands of lighters in its global stores. This allows large supermarkets to offer cheaper prices than smaller supermarkets.

Buying and selling stocks is similar, albeit to a lesser extent. Compared with ordinary investors, large clients can negotiate lower commissions and fees; Another disadvantage is that the typical investor does not have the same initial public offering (IPO) opportunities as banking institutions.

Mitigation strategies

No matter how much you care about your business, keeping track of your investments and setting your stop losses is critical to your success. Stop losses are a common reason investors lose all their money in the stock market. However, many investors use diversified index funds as a form of passive investing. No matter how you choose to invest, it helps to keep a close eye on your portfolio to manage risk.

The Bottom Line.

It appears that the stock market has not been favored by big investors. Laws and regulators are in place to ensure a level playing field for ordinary investors.

Keeping a close eye on your assets and taking risk mitigation measures, such as things like setting stop losses and considering general investment themes or trends, can allow you to overcome any imbalances and continue to thrive through your investments.