Why do institutional investors often have lower costs and risks compared to retail investors? Retail investors calculate their "mental accounts" differently from institutional investors' "cost accounts." Think about it: when a stock rises from $10 to $20, retail investors usually hesitate to chase it, thinking it's too high. But when it drops back to $15, retail investors see it as $5 cheaper and feel it's a good deal. This is a type of anchoring bias, where the $20 high becomes the reference point. However, institutional investors might have entered at $5. They pushed the price from $5 to $20, and even if it drops back to $15, they can still make $10 profit per share when selling. So, what retail investors see as a "bottom" at $15 is actually a great spot for institutional investors to "cash out big." This is a "valuation mismatch": retail investors focus on how much the price has dropped, while institutional investors focus on how much profit they've made. Institutional investors' "selling off" is a carefully planned retreat. After pushing the stock price higher, they can't sell everything at the peak, as that would crash the price. Instead, they need to find ways to get others to take over their positions. How do they attract buyers? By creating the illusion that "the dip is an opportunity." They use their remaining shares to occasionally push the price down a bit, then stage small "rebounds," giving the market the impression that "the price can't drop further, it's about to rise." Every small rebound could be part of their preparation for the final exit. Retail investors, seeing a brief stabilization or rebound after a drop, often forget the risks and think, "This time, I might have caught the bottom," and then decisively buy in. But this plays right into the institutional investors' hands. Most people's "bottom fishing" is actually "catching a falling knife." More importantly, it's often hard for us to distinguish between a "drop" and a "downtrend." - A true bottom is usually formed when institutional investors quietly accumulate shares at low prices, while the market is pessimistic, and no one dares to buy. - The "bottom" that retail investors dare to buy is often a position where the stock has already risen significantly and is now pulling back. By this point, the stock's fundamental logic may have changed, but retail investors are still stuck in the fantasy of its past rise. Retail investors keep buying as the price drops because they're relying on feelings and comparing it to past prices. Institutional investors, on the other hand, can sell at those levels because they have cost and position advantages and know how to exploit human psychology.