65-Day Academy · Day 4 · Foundations
The Cast — Who Actually Moves Prices
Institutions dominate
Institutional investors (mutual funds, pensions, hedge funds, insurers) account for the large majority of US equity volume. Their flows — driven by inflows/redemptions, index rebalancing, and mandates — move markets far more than retail. When a fund's largest holding gets redeemed against, it must sell regardless of opinion. Forced flows create the inefficiencies patient investors exploit.
Market makers & HFT
Market makers quote both sides continuously and earn the spread; high-frequency firms trade in microseconds, arbitraging tiny discrepancies. You will never out-speed them — do not try. Your advantages are patience, horizon, and the freedom to do nothing. Play a different game than the machines.
Retail: small but loud
Retail is ~20-25% of volume but concentrated in specific names (memes, options). Retail flows cluster at round numbers and chase headlines. Knowing where the crowd clusters helps you avoid being the exit liquidity. As Buffett says: be fearful when others are greedy — the crowd's mood is data.
What you'll practise
True or false: because institutions dominate volume, an individual investor cannot beat the market.
10 XP in the app · introductory
Sources
- Institutional OwnershipInvestopedia
- Buffett — Shareholder LettersBerkshire Hathaway
Take this lesson graded in the app →
All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.