Investing term

What is Edge?

Whatever it is about you that gives this pick a chance to outperform — information, time, temperament, or focus.

An edge is the specific reason your investment pick has a chance to beat the average — better information, a longer time horizon, steadier temperament, or deep focus on a niche. In a market full of professionals, you have to ask honestly what yours is. If you can't name an edge, you're likely better off just owning the index.

For example

A patient individual investor's real edge is often time horizon — the freedom to hold through a multi-year slump that professionals, judged quarterly, cannot.

Edge is taught hands-on in Stage 13 — Active Investing: Should You Even Bother?.

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Related terms

Active investingPicking individual stocks (or actively-managed funds) instead of just buying the index.CatalystThe event or condition that will close the valuation gap — and an estimated timeline.Circle of competenceThe set of industries, business models, and types of companies you actually understand well enough to evaluate.ConvictionHow strong your evidence is for a thesis — and therefore how much capital it earns.
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