LCI - Best Private Investor
In this article you can familiarize yourself with the results of a study of statistics on exchange participants for 7 years, which shows what the chances of the average exchange player (namely a “player”, not an investor) are to make money on the exchange.
Previously, information was periodically leaked to the public containing a generalized analysis of the chances of success among the exchange public: about 95% of all exchange participants by the end of each calendar year have less money than at the beginning, i.e. receive a loss. About 5% are in the black.
95% receive losses. 5% - profit?
This information in the form of rumors leaks onto the Internet, but such materials are usually not published on purpose, because, as the brokerage and stock exchange industry believes, they can damage their business, portray it in a negative way, and alienate people. But is this true? Let's check it ourselves, without resorting to closed broker statistics - based on open data.
For our research, we took open statistics on the “Best Private Investor” competition, contained on the competition website. “Best Private Investor” (BPI) is a competition among individuals, which is held by the MICEX (Moscow Interbank Currency Exchange).
The competition is held once a year and lasts about three months. The winner is usually the one who receives the highest return (as a percentage) of the starting capital. There are many nominations: the best player in the stock market, foreign exchange or derivatives market, etc.
Why and who needs this competition?
The purpose of this competition is to popularize financial markets, securities, investing, increase financial literacy, attract people's attention to the industry, etc.
However, adamant investors and many well-known financiers criticize this competition, since, in their opinion, it does not popularize investing, but gambling .
It turns out to be a paradox and, in their opinion, some substitution of concepts: by definition, investors cannot win at such a competition or somehow prove themselves, because investments do not involve taking on enough risk to show double-digit returns over a three-month horizon.
The brokerage industry makes money on commissions ; these are intermediaries between those who want to buy and sell. Those. The broker's profit does not depend on the success or failure of the transaction; turnover is important to him.
The Exchange (MICEX) is also a commercial organization, its profit also comes from commissions from transactions of trading participants. Both brokers and the exchange, like any commercial organization, are interested in increasing their profits .
to increase profits in this business (in fact, it may not be the main activity): to increase the volume of turnover that these organizations serve.
The exchange and brokers benefit from:
- when the size of the average transaction of trading participants increases
- when the frequency of transactions among bidders increases
- when the number of bidders increases
Willingly or unwittingly, all advertising and marketing of the industry is aimed at increasing all of the listed indicators, especially indicators 2 and 3:
- Brokers conduct numerous free courses where they teach beginners how to trade “correctly”. At the same time, they teach exactly active trading - one in which a person will perform many operations (transactions), and this subsequently pays for the “free” nature of this training.
- The exchange holds competitions , focusing the public's attention on the performance of the winners, creating the illusion that everyone can achieve the same result.
Doing this is absolutely normal for a business that is always interested in increasing its profits .
However, as a result of such “advertising”, people with an insufficient level of competence and an attitude towards the market as a casino are attracted to the financial markets:
This also happens because brokers and the industry do their best to draw our attention to success stories and instill the idea that making money on the stock exchange is very simple.
According to skeptics, such competitions in the long term give the exact opposite effect to what the organizers are seeking: the majority of incompetent market participants simply lose money.
“Burst players” leave the market, are disappointed and forever decide for themselves not to contact the exchange anymore, sharing stories of their exchange losses with friends and acquaintances, creating a general negative image of the exchange among them.
At the same time, opponents of the competition believe that people who chose the “right position” would become clients of the exchange and brokers for decades and would bring much more benefit to the entire industry.
The “correct position” is beneficial to the investor in the first place: he becomes rich, his transactions increase in volume over time (over the years), and his broker and exchange rejoice along with him - they receive their commissions.
According to critics of the LCI competition, such an investor, by his example, interests friends and acquaintances who also want to get rich, and they also go to open a brokerage account and start investing. Here is a model that would benefit everyone.
Investors often pay attention to the fact that brokers, trying to show people in their free courses that making money on the stock exchange is easy, talk about the most difficult methods - trying to play on fluctuations and exchange rate differences , which, as we will see later, few succeed. while a simpler and more guaranteed way to make a profit (investing) is not considered or taught!
Why do people participate in such a competition?
- Opportunity to become famous . The winners will enjoy awards ceremonies and interest from the media and public.
- Having shown decent results (not necessarily prize-winning ones), you can subsequently try to monetize your competitive achievements by engaging in training or other paid services (the so-called “circuit market” )
- Out of curiosity
Success stories excite the imagination. Thousands of percent per annum! Maybe I can do this too? Maybe I have talent, but I don’t know about it? Maybe I should check myself, try?
To understand what the chances are of getting the desired result (wealth, fame), you can and should look at the stock exchange statistics. To do this, let’s look at the only open place where you can still find stock statistics - the website of the Moscow Exchange, or rather, the section dedicated to the LCI competition :
LCHI-2020. Intermediate results.
Good day, friends!
It’s another Friday and we are again looking at the interim results in the main competition of traders on our market - LCI 2020.
The week turned out to be flat, albeit volatile in places. This made some adjustments. Profitability is no longer so great. Options traders suffer losses on trendless fuss. Well, or they don’t receive the expected income. Prizes are burning out. In this regard, adherents of spot trading perked up. The top five looks like this:
The profitability of the first three exceeded 100%, although yesterday no one had such figures. And there seemed to be nothing wrong here. But the leader immediately surpassed this mark thanks not to speculation in the derivatives market. He should thank the Aeroflot short. Briefcase Slanroyal14
, which is now in first place looks like this:
That is, shorts, and with good leverage too! And considering that Aeroflot shares lost almost 5% today alone, the leader is leaving for the weekend in high spirits. It’s not clear how, and most importantly, why, one Yandex share has found its way into the portfolio. Anyway. The winners are not judged. Probably some kind of clever diversification 
Enter1 continues to be among the outsiders
- winner of the season before last. Minus 85%. He continues to fight. During the week it was stormy plus or minus 20%. It seemed that he caught the wave in the moment and could at least break even. But in the end he won it all back.
Among the heavyweights there is something interesting. The leader in absolute income with a result of +15.5 million rubles is still Kimi07.
In a week, little has changed for him here. There were no deals. Profitability is approximately at the same level.
In his portfolio, he has long positions in Sibneft, Tatneft and VTBA. The latter is not VTB shares, as some might think. This is an ETF for major US stocks. The lion's share of the portfolio is in it, and given that the Americans are growing up, that's where the result comes from.
A couple more interesting characters have been added to the capitalists' company. Firstly, this is ml_20
with a starting capital of 64 and a kopecks million rubles. The profitability is not great yet, but what is remarkable is that it works in all possible markets at once.
At the moment his positions are as follows:
That is, he mainly holds the dollar, of which he bought almost 50 million rubles.
Also added olb852420
with a starting capital of 75 million rubles. Also works at several sites, except urgent. But it gives preference not to the currency section, but still to the stock section. This makes the result worse. But not by much.
The absolute leader in starting capital Apathy
So far it doesn't shine with results. But this was generally expected. After all, it doesn’t really do anything. Let me remind you that his initial amount was 115.5 million rubles and it was invested in 650,000 shares of Gazprom. The only thing that has changed is that I bought another 3,000 shares of the same issuer.
So it goes. There is still no one from us yet, since the registration tab has not been completed. And this is unfortunate, since our regular resource Olga, who already conducts public trading, both before the competition and during it, would have already been in almost 150th place out of almost 14,500 thousand participants with her profitability from the beginning of the competition. Maybe someone else dared and with equally good results.
Anyway.
Have a nice weekend!
Stock statistics
So, it's time to get acquainted with stock market statistics. No analogues of this study were found on the Internet, so for now we can write that this data is exclusive.
Below are the results of stock market players for 7 years. Since the competition lasts only three months, then if we count continuously, over 7 years only 7 * 3 = 21 months came under observation, i.e. almost two years of continuous exchange activity of participants:
We see that in 21 months the “average” participant earned 21 thousand rubles, and everyone together earned 76 million rubles. Is it good or bad?
It depends on what you compare it to. Usually compared with the yield of OFZ or a bank deposit . In our study, we will first compare the results of exchange players with deposits in Sberbank. How much did exchange participants beat the bank deposit?
And here the cruel truth begins, because the participants lose in total to the bank deposit , this is clearly visible in the following table:
If all participants, instead of the exchange, took the money to bank deposits, they would earn 2 times more: 158 million instead of 76 million rubles!
Why then do you need such an “investment”? What is its meaning? In fact, this is exactly what investing is not . As mentioned above, this is the reason why many reputable financial advisors criticize this competition - because it is misleading about the nature and potential returns of the investment, because the competition has nothing to do with investing.
Looking ahead, let's say that it is in investing, and not in the stock exchange game, that there really is meaning. If participants, instead of stock exchange games, bought and held the 10 largest shares of the Russian market (part of the MICEX index), they would have earned 7 times more money:
But do stock market players make money in general? After all, even from these statistics it is clear that the stock exchange fraternity is “in the black”: for 21 months the profit amounted to 76 million rubles.
Yes, this profit is two times less than what could be earned on a bank deposit during the same time and 7 times less than what could be earned by simply holding the 10 largest shares of the Russian market from the MICEX10 index.
But... it’s still a plus, isn’t it?
The bitter truth is that out of these 76 million rubles of total profit, 57 million rubles were earned... by one person and this happened in 2014. 2/3 of the total profit of all traders in 21 months was earned by one person!
We see that these statistics with their averages do not tell us anything and can even be misleading. What awaits an ordinary person who decides to “learn” how to make money on the stock exchange? We need to see the fate that awaits the majority of exchange participants.
