Why is there a discrepancy between AVERAGE annual returns for retail vs institutional traders

Beginner Questions
1

Simmons: 66% (skeptical of this, but let’s assume this is correct)
Soros: 20%
Buffet: 15%
Dalio: 10%

… guy on YouTube: 100%

There are two possible reasons for the discrepancy:

  1. Youtube guy is lying. (I’m erring towards this one)
  2. Youtube guy is able to achieve those returns because he’s not trading according to strict diversification and risk management mandates that put a cap on his upside like the institutional investors do.

Follow up question:
If the YouTube guy is lying, this means there are only two possible ways to make a livable income trading:

  1. Start with a capital of $300,000 (that’s $60k a year with an amazing average return of 20%)
  2. Get hired by a hedge fund or start one.

These two scenarios scenarios seem out of reach for the vast majority of people, at least in the beginning.Is there a third more feasible option?

2

I think you missed some 0s in the result of the YouTube guy. 100% for a YouTube guy is nothing :slight_smile:

I think Buffett is above 20%. As for Simons, I think this result will be corrected if he loses the dispute with the NRA about some taxes. But still, it will be impressive. Cohen’s performance was also impressive with 35%.

The larger the amount the lower is the return. You can’t invest billions and make 200%. You have investors to satisfy and they won’t be happy if you show them -60% and say don’t worry we’ll go all in the next year and everything will be fine

It also hard to get leverage. While for us, retail traders, you can get that 20% and multiply it with the leverage

3

Its not helpful to compare private retail traders with hedge fund managers or Warren Buffett, who isn’t a trader anyway.

In principle, a 100% annual return is not incredible for a short-term trader. It only requires 6% per month. The problem is consistency in selecting a simple strategy that works permanently and without high risk, and then following it consistently.

4

Here is a possible explanation.

Guy on YouTube is trading a demo account.
Hence making zero from zero and only actually making money from YouTube hits.

Big names.
They are investing other peoples money.
Hence have rules and regulations placed on them by regulators and or themselves.
Hence return is limited but still extremely good compared to a standard savings account with a bank.