Why private investors can out-perform the professionals

​Peter Lynch, a very successful professional investor, is astonishingly scathing about his profession.  His number one rule is to stop listening to the professionals!  He is convinced that ordinary people ‘using the customary 3 per cent of the brain’ can perform just as well, if not better, than the average ‘expert’.
He really believes that there are a lot of dumb investing decisions made by those who are paid large salaries and bonuses to look after other people’s money.
On the other hand the amateur has many built in advantages that could lend to market out-performance – and out-performance of the professionals.
The professionals face a number of constraints that the amateur can avoid.  There are social and political obstacles stopping fund managers being different from the crowd.  If they take a chance and it turns out badly then they will be blamed – it is better for them to go along with the crowd.  Then, there are all the institutional rules and regulations that prevent rational investing:

1. They are restricted to investing in only certain types of share. Committees may create lists of companies for the manager to choose from. If the list contained dynamic and exciting companies then that is fine, but too often only those that satisfy all 30 committee members are included. Thus they usually exclude the exciting young small company that has found a very profitable niche. Just as no great symphony was ever written by committee, no great portfolio has ever been created by one.  The committee members hardly know the firms they are excluding or including.  They certainly have not visited the companies or investigated their future potential.
2. They cannot invest a significant fraction of the fund in a handful of outstanding bargains but have to spread the fund very thinly across the market investing only a small percentage in any single share.
3. They are limited to buying only highly capitalized companies. Because of the amount they are investing they have to purchase shares in sizeable companies.  They like to buy only those shares with high liquidity.

Whilst admitting that there are some exceptional fund managers, Lynch says the majority are ’run-of-the-mill fund managers, dull fund managers, comatose fund managers, sycophantic fund managers, timid fund managers, plus other assorted camp followers, fuddy-duddies and copycats hemmed in by the rules’.
The Oxymorons
Lynch and Warren Buffett use this term to describe professional fund managers, who they think fail to qualify as investors as they understand the word.
What is it that these pe