You often hear in the market that large fund accounts rarely suffer huge losses, while small retail investors are easily wiped out. In fact, the key difference lies in the tolerance for errors— their operational logic is completely different.

Large funds never go all-in; instead, they build positions gradually and manage them in layers. Even if a single position incurs a loss, because the overall portfolio is diversified, the loss only affects a part of the holdings and has limited impact on the overall account. They usually divide their funds into multiple cycles and position at different price levels. This way, a single pullback cannot shake the overall situation.

The situation for small funds is quite the opposite—they often go all-in at once. If they are confident in a certain direction, they go full position, but if the market then pulls back 15%, they get caught completely. There’s no buffer space, no chance to readjust, and they get locked in, unable to move.

In simple terms, this reflects the ability of capital management. Large funds have the capital to tolerate errors; small funds can only gamble once. Understanding this difference helps explain why some can still thrive in a bear market, while others can lose everything even in a bull market.