During the Vietnam War, the guerrilla fighters put up a resistance against the Americans. We all know the mighty Americans had the most advanced military weapons and established fighting doctrines. The Vietnamese would not be a match to the Americans had they fought a conventional warfare. Instead, they cleverly strategised and used guerrilla tactics to undermine the Americans war fighting doctrine. Although we cannot conclude which side had won the war, but a stalemate is impressive enough for the less equipped guerrillas. The most amazing resistance happened in Cu Chi.
Edge no 1 – decide when and where to fight
The guerrilla fighters dug a 3-storey 250 km tunnel network in Cu Chi so that the fighters can avoid the aerial bombardment from the Americans. I remembered a phrase in The Blue Ocean Strategy and I like it a lot – make competition irrelevant. By choosing not to fight the Americans head on in the battlefield, the guerrillas made air attack irrelevant.
Edge no 2 – making small size an advantage
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The tunnels were narrow and shallow. The size was sufficient for the Vietnamese to get in and out, and to move around. The height and width of the tunnel were 0.8-1.8m and 0.8-1.2m respectively. It consists of meeting rooms, hospitals, kitchens and living quarters.
The size of the entrance would deter the larger Americans from getting into the tunnel (if they find it in the first place). Some Americans did get into the tunnels but many of them were killed. (The following picture showed a Brit who could not get into the tunnel. He was too tall for it.)
Every solution to a problem will incur a new problem, and you must be able to identify this new vulnerability and minimise it. Staying in the tunnel would protect the guerrillas from air attacks but it created a new vulnerability – they require sufficient oxygen supply in the tunnel to survive. They do it by building air-holes that are disguised as ant colonies. The Americans would not be suspicious when they spot one.
However, the Americans could employ dogs to sniff and identify these airways. The guerrillas then placed dead American uniforms near the air holes to trick the dogs. This was said to be effective to a large extent.
The point I want to make…
In trading or investing, you are just a small retail investor against many big institutions who have advanced technologies and access to information than you. You are like the guerrillas in Vietnam War. What is your strategy against these big institutions? What is your investment edge? If you invest in a conventionally accepted manner, you will be beaten by the pros. If you follow what CNBC or the experts recommend, you will definitely lose your pants.
Edge no 1 – decide when and what to invest
As a retail investor, you have the flexibility to decide when and what to invest. You do not have the fund restrictions like 90% invested at all times, or only to invest in equities. You have total control on your investment. Choose your battle time and location, and do not follow the crowd. Do not buy because the media or the so-and-so guru recommends.
Edge no 2: making small size an advantage
Having smaller positions also mean you can liquidate fast. If an investment turns sour, you can get out easily. A fund would take days or even weeks to unwind a position. Hence, make use of tools like stop loss orders to limit your losses.
I am not trying to suggest you should apply these exact investment edge that I described. I just want to give you an idea that it requires more thinking on how you can win the battle in the investment arena. This will determine your success in trading or investing.
If you are able to find your edge, do not tell anyone about it. Because the law of supply and demand will always apply. If too many people are investing the same way, the method will stop working.
Although I praised the ingenious way the guerrillas fought, it does come with a price. The living conditions in the tunnel were very bad – no light, poor ventilation, lack of food and water, insect and snake bites etc. I could feel the claustrophobic feeling while crawling through just 20m of the tunnel. I cannot imagine how did the guerrillas stay in it for 20 years. According to the account of a guerrilla who was captured, half of the population underground had malaria at any one time.
Despite the hardship, the guerrillas were able to stick to their plan. Likewise, besides having grand ideas or strategies, you must be able to execute it. Acting against the greed and fear is much more difficult than most people think. What are the sacrifices you need to make while applying your own investment edge?