A Poor Man’s Arbitrage: Toronto-Dominion Bank (TD), Marathon Oil Corporation (MRO) and More

Also, another aspect to keep in mind is when working with smaller amounts of shares, commissions, fees, and (short-term) capital gains taxes can eat away profits. In this way, the poor man’s arbitrage works against the small “Mom and “Pop” investor seeking long-term capital appreciation with a focus on dividends. As such, it is abusive to the long-term investor, as likewise is the case of  professional and institutional arbitrage.

As the senior investor Lou Mannheim remarked to Bud Fox, in Wall Street, “Man looks in the abyss, there’s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.” I think as is in the film, short-term gain often leads to long-term market pain. Therefore, value investors should act ethically and make sound decisions within the broader (retail) investor community. By doing so, we establish the kind of good will, which is so rare in today’s market.

Analyze Carefully

This is just one investing technique! There are even more. While, no single technique or strategy is a sure thing, each one has its advantages and disadvantages and must be carefully weighed prior and during investment. But some investment decisions are sounder  than others. By examining each carefully, you’ll go a long way toward improving your investing skills and learning how to separate out the most attractive investment strategies, arbitrage, or otherwise, from the rest.

The article A Poor Man’s Arbitrage originally appeared on Fool.com and is written by David Mercer.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.