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Every July, the Tour de France takes over my house.
We get pulled in and watch every stage
It’s the most famous and demanding bike race in the world, and it can teach you a lot about investing.
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Somewhere around 200 riders race roughly 3,500 km (2,200 mi) across flat plains, rough cobblestones, and up and down the alpine peaks of France.
If you watch the race, you’ll see the peloton, the main pack of riders, cycling tightly together at high speeds.
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If you’re not familiar with what’s going on, it looks like one big race where everyone is trying to get to the finish line first.
But it’s not.
The Tour de France is actually several completely different competitions happening at the exact same time, on the exact same road.
Here are the different games being played inside that pack:
Stage Wins: The Tour is broken up into 21 “stages” (one race per day). A lot of riders are there just to win a single day’s race
The Green Jersey (Points Classification): This gets awarded to the best sprinter. These riders only care about winning ‘intermediate sprints’ (think mini finish lines in the middle of stages), or being the winner at the end of specific, flatter stages.
The Polka Dot Jersey (King of the Mountains): Awarded to the climbers. These riders get points for being the fastest up the steepest, longest climbs in the race.
The White Jersey (Best Young Rider): Awarded to the fastest rider under the age of 26. These guys are really only racing the other young riders.
The Yellow Jersey (General Classification): This is the ultimate prize. It is awarded to the rider with the lowest cumulative time across all 21 stages. To win this one, you have to be good at everything (and have a strong team to help you).
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What’s this have to do with investing?
Read on, and you’ll see where I’m going.
The Stock Market is a Peloton
Recently, Robert Hagstrom, author of The Warren Buffett Way, described the stock market as "heterogeneous."
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What he means is that it isn’t one thing, with one goal.
It’s a collection of different players, playing different games, with completely different rules.
When a stock price moves a lot, it's easy to assume the market knows something you don't.
But most of the time, the move has nothing to do with the strategy you're following.
Just like the Tour de France, the market peloton has more than one competition going on.
Pod Shops: Large hedge funds that use leverage and strict risk limits. They often have to sell automatically when positions move against them.
0DTE Traders: Speculators trading options that expire the same day. Their activity can create large short-term price swings.
Retail Traders: Often driven by social media, momentum, and FOMO.
High-Frequency Traders: Algorithms that profit from tiny price movements measured in fractions of a second.
Macro Funds: