The Endurance Game: How Patient Investors Outlast the Market

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Ask an individual investor why they bought a stock, and the answer usually involves something they know or information that reached their desk. Maybe they use AI tools every day and can see where the technology is going. They work in medicine and understand what a new drug can do. They follow an industry closely and believe they’ve spotted something early.

It’s a natural way to think, but it usually leads people astray. Even if an investor is smart and is well-informed, on the other side of the trade is usually a professional who studies that same industry every working day, speaks with management, and has a team of analysts behind them. Competing with that is a hard game to win.

Alex Edmans, a professor of finance at London Business School and author of The Madness of Markets, has argued that individuals have a different and more durable advantage over professionals. It lies in what they’re free to do.

You Won’t Out-Research a Full-Time Analyst

Some experts put “know your edge” near the top of their list of practical rules, and the point is to be honest about where an edge could possibly come from. Having used ChatGPT to plan a vacation doesn’t give anyone an informational advantage on the AI trade. A doctor’s familiarity with beta blockers is interesting, but pharmaceutical analysts have already priced it in.

Once you let go of the idea that your edge is information, a more useful question opens up. What can you do that a professional can’t?

The Clare College Example

At the height of the 2008 financial crisis, stocks looked cheap to anyone willing to take a long view. In late 2008, Clare College borrowed £15 million to invest in global equity funds, with a financing arrangement extending over 40 years. Over the following decade, the investment more than doubled in value, comfortably outpacing the rise in the college’s debt. The college could afford to take this approach because it was investing to support teaching and research for decades to come. It didn't need to predict exactly when markets would recover. It had the freedom to wait.

An individual investor saving for retirement can have a similar advantage. Nobody can fire you for underperforming for a year, and you don't have clients threatening to withdraw their money. If your investment horizon is measured in decades, you can afford to look beyond short-term market movements. This is what Alex Edmans calls the endurance game, and it's an advantage that many individual investors underestimate.

Why Momentum Still Pays 33 Years After Its Discovery

Career risk explains more than one market anomaly. Momentum, the tendency for recent winners to keep winning and recent losers to keep losing, was formally documented in 1993. By the logic of efficient markets, that should have been the end of it. Once free money is identified, someone takes it.

Yet momentum still works, across countries and across asset classes, from equities to bonds to currencies. The psychological root is underreaction. People anchor on their existing view of a company and discount news that challenges it. Amazon launched what became Amazon Web Services (AWS) in 2006, but investors kept thinking of it as a place to buy books and CDs. Only when the company started reporting AWS results separately, around 2015, did the market fully absorb what it had.

The catch is that momentum occasionally crashes, and when it does, the damage is violent. Years of gains can disappear in weeks. Some of this is foreseeable, since momentum tends to struggle when volatility, as measured by the VIX, is elevated. But not all of it is.

For a client holding many funds, one strategy’s crash is a manageable event. For the manager running that strategy, it can end a career. So professionals typically take less momentum exposure than would serve their clients, which leaves the premium on the table for anyone who can live through the bad stretches without getting fired.

Where Big Money Can’t Follow

Some experts distinguish between what they call level one and level two strategies. Level one is identifying a bias and exploiting it, like buying recent winners. Level two asks where that bias is strongest. Underreaction is most extreme where nobody is paying attention, in small stocks with little analyst coverage that never make the front page.

Those are also the places large funds struggle to operate, since there isn’t enough liquidity to put serious capital to work. One manager’s constraint becomes a smaller investor’s opportunity.

The same logic applies to overlooked news. In April 2025, a frost wiped out about a third of Turkey’s hazelnut crop. Hazelnuts are to Turkey roughly what coffee is to Brazil, and the story ran heavily in the Turkish press. It barely registered elsewhere. But one Hedge Fund noticed, flew to Turkey, and found the country’s only listed hazelnut processor sitting on a large stockpile. It invested $20 million. When the shortage finally reached international headlines, the company’s value rose about 40%.

A World Cup Exit Costs the Market Half a Percent

Freedom is only an advantage if you don’t squander it, and the biggest threat to an individual’s edge is usually the individual. When a country is knocked out of the World Cup (in football), for instance, its stock market falls about half a percent the next day, even after adjusting for global moves. For the UK, that’s more than £10 billion gone because of a football match. Later work has found that the happiness of a country’s most-streamed songs tracked its stock market too.

One key related lesson is that nobody becomes perfectly rational at their desk. Mood leaks into decisions, including decisions made by people who are paid to be objective.

Habits That Keep Emotion Out of the Trade

The most practical defenses are simple, which is probably why they’re so easy to skip. Many experts suggest the following for most investors:

Check your portfolio less frequently. Watching positions daily encourages trading on news that someone else has already acted on, which means buying after a rise and selling after a fall. Infrequent checking pushes decisions toward long-term factors, like a market trading at a deep discount in 2009.

Before any trade, write down the case against it. If you want to buy an AI fund, spell out why you might be wrong, including specific numbers on valuation. Writing forces you to take the risk seriously, and it gives you something to measure against later, so a failed investment becomes a lesson instead of an excuse. Some people also set explicit exit criteria at the outset.

Watch for the disposition effect, the reluctance to sell a loser and admit the mistake. One workaround is to roll a losing position straight into a new holding so that, mentally, the trade is still open. Another is to hand the sell decision to someone else.

Even small frictions matter. Round numbers attract clustered orders, so a limit sell at $99.90 is more likely to fill than one at $100. The emotional difference is nothing, though the practical difference can be much more legitimate.

Not Every AI Company Can Be the Winner

The endurance mindset also changes how you look at a boom.

One market commentator has described a pattern they call the big market delusion. When a new technology captures the imagination, investors bid up nearly every company in the industry, and the combined valuation implies more profit than the industry could ever produce. In the early 2020s, the major electric vehicle makers together were valued above the entire traditional auto industry, at a time when EVs were still a small slice of sales. The sector turned hard in 2022 and 2023.

AI may well be the future. That doesn’t mean every hyperscaler or chipmaker will earn a return on today’s spending. Some will overinvest, and some will invest in the wrong things. Some investors cut their own tech exposure some months back, partly because they have lifestyles and bills and mortgage refinancing ahead and wanted to lock in gains. For them, they aren’t worried about missing the top. They’re more worried about being caught in the reversal. Of course, everyone’s objectives, goals and time horizon vary, so there’s no one-size-fits-all approach.

Patience Is An Edge Only Individuals Can Afford

So much of what drives prices in the short run is emotion, crowding, and professionals protecting their jobs. None of that is an edge you can buy, but the freedom to ignore it is one you already have. The individual investor isn’t going to out-research a sector specialist or out-trade a quant fund.

What they can do is hold a cheap asset through an ugly year, stay with a strategy through its drawdowns, and resist buying every company in a hot sector. Doing that consistently is harder than it sounds, which is why it keeps working.

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DISCLAIMER: This article is based on a conversation from Top Traders Unplugged and reflects themes, ideas, and perspectives discussed during the episode. The views expressed are those of the guest and participants in the conversation and should not be interpreted as investment advice or as the official views of Top Traders Unplugged.

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