How do average people invest and why isn't everyone rich already?

[scooterguy]

It seems very straightforward; even with a basic salary, if a person invests a little bit every month in the stock market and other assets, most people would not need to work after 10–20 years.

A lot of people, especially the middle class, are obsessed with money; hence, it makes even less sense that they haven't figured this out.

Some reasons I can think of are:

1) The vast majority of people think that certain liabilities are actually assets. For example, they purchase cars or houses with money they don't have, paying interest and mortgages for decades. This slows them down significantly.

2) Brainwashed to work till 65. I believe that a lot of people already have a plan to work until they are 65, and so they make their calculations based on that. Very few people seem to tell themselves, "Wait. Why do I need to work till 65?"

3) Lifestyle inflation. Most people, when they receive a salary increase or bonus, instinctively increase their expenses (they buy a nicer car, move to a bigger house, etc.) instead of continuing to live as they were and using the extra cash to keep building their net worth and passive income.

4) Overreliance on social security. Most people are happy with a job, an 'emergency fund', and knowing that they will get SS when they retire or if they are fired, which makes them even less likely to think about alternative ways to build significant net worth over time.

5) I noticed that a lot of people in the middle class think that you either work or become rich overnight (through winning the lottery, building the next Facebook, etc.). Very few realize that there's also a realistic middle ground: to acquire those millions patiently over the decades.

With so much information nowadays online, it really amazes me that this is not widely known. Or do people really spend most of their time online watching teenage girls dance on TikTok?

Thoughts? Maybe someone can also add more to the list of mistakes so that we all become better investors overall?

 

[JohnnyDoe]

The majority of those who invest (read “gamble with”) their money eventually lose it, because they think they are smarter than the other millions of investors and can regularly make 100000%+. Of course they do so with the support of sophisticated mathematical models that are as good as horoscopes.

Here https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator you can calculate what a reasonable 8% annual compound interest rate can generate over time.

 

[scooterguy]

The majority of those who invest (read “gamble with”) their money eventually lose it, because they think they are smarter than the other millions of investors and can regularly make 100000%+. Of course they do so with the support of sophisticated mathematical models that are as good as horoscopes.

Here https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator you can calculate what a reasonable 8% annual compound interest rate can generate over time.

I remember the first time I was taught about compound interest in college, I immediately got fascinated with it lol.

But when trying to teach others about it, most people look at me as if I were talking about Jesus or aliens. The only few times that my message was successfully received was with people who were already showing entrepreneurship signs and a clearly different mindset.

 

[JosephLL]

Access.

 

[void]

people don't understand the significance of two simple things... expected value and variance - incorporating these simple principles into your decision making gives you an incredible advantage

parents don't understand, teachers don't understand and rationality in people's decision making is not in interests of the slavers either

 

[polonieth]

I think the main thing is the lottery mindset. Most people are taking big risks to try and get huge upside. Which rarely works out.

 

[Mercury]

Here https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator you can calculate what a reasonable 8% annual compound interest rate can generate over time.

True. Compounding is great when you have enough time.
I wish I had started in my 20s/30s.

If you start your investment journey at 50+ you have sadly no time to wait becoming financially comfy at 70+ (if ever you reach that age and in good enough health to enjoy this new wealth).

For old chaps, fortunately there's crypto!

 

[jafo]

PS. That's as much disclosure as I am willing to share about all my investment follies

 

[Clank]

Most of the people I know got rich by making a company and solving problems, very few people get rich by investing.

I see investing as a form of preserving wealth, not as a way of getting rich. Unless you can live forever, then maybe at some point you get rich by investing.

 

[scooterguy]

Most of the people I know got rich by making a company and solving problems, very few people get rich by investing.

I see investing as a form of preserving wealth, not as a way of getting rich. Unless you can live forever, then maybe at some point you get rich by investing.

That's exactly why very few get rich by investing, because of this misconception that investing is only for wealth preservation.

You don't need to live forever; compound interest is much more powerful than it seems at first glance.

 

[wellington]

Many many years ago - my company was wiped out from insider destruction.


First was to share tech - there was a billionaire in the same space that wanted the technologies

Second was to force me out

Third was embezzlement

Fourth was scorched earth that had many associated universities blue chip companies in the firing line

There wasn’t much left after that

I believe there was something like 300,000 left after paying off all the staff and all the vendors etc which was earmarked for me.

I had a deferred salary meaning I was owed millions and had spent the best part of 7 yrs working 16 hrs + per day 6 days a week and 4-6 hrs on Sundays

The 300k I had to keep the tech stack operational, I had to keep the accounting and financials I had to pay lawyers I had to pay for all the things for a company of 30+ full time techies going into zombie mode.

The new company turned that 300k into 9 figures then turned that number into a bigger number, today the new company is 80+% automated and some of the old core team work for it still

The tech stack was AI, the so called horoscopes John Doe refers to.

My first course of action was righting anyone and everyone impacted directly or indirectly.

My second course was building out automated and to the point the company didn’t need outsiders to sustain itself.

Today is a different day from those dark days.

My point here is John Doe on this has zero understanding of what he is referring to (algorithms/ai)

My second point is having determination and commitment and educating yourself and finding the tools or people when you have short comings.

Throwing money without having either the skills, experience, knowhow or people is gambling.

My only regret - is my heart - Covid vaccine - two heart attacks - means I have to step away because there’s nothing like loosing a baby you’ve committed so much of your life too - rebirthing and building out much much larger.

 

[JohnnyDoe]

The tech stack was AI, the so called horoscopes John Doe refers to.

you might be the exception that proves the rule. I prefer not to risk dying of hubris, like many people smarter than me. These two guys come to my mind:
https://en.wikipedia.org/wiki/Myron_Scholeshttps://en.wikipedia.org/wiki/Robert_C._MertonYou surely must be above and beyond them. Enjoy your success!

 

[wellington]

you might be the exception that proves the rule. I prefer not to risk dying of hubris, like many people smarter than me. These two guys come to my mind:
https://en.wikipedia.org/wiki/Myron_Scholeshttps://en.wikipedia.org/wiki/Robert_C._MertonYou surely must be above and beyond them. Enjoy your success!

There's entire corporations that work specifically in the high-frequence, algo, quant, ai field.

Renaissance Technologies has existed since the 80's in the field and one of its founders Robert Mercier branched the same technologies they used (in part) outwards as Cambridge Analytica which was used to win an election.

The same technologies (AI) that derive intelligent information can be and are used to coerce the average pleb.

It's the field i've been in from 2002 except a period around 2006-2012.

https://www.rentec.com/Home.action?index=true
Doesn't look like much right?

Last time i had dealings with people that worked for them they had 60 billion $ AUM and it was ALL employee money... average growth then was 40% PA when the street was lucky to get 10-15%.

 

[JohnnyDoe]

There's entire corporations that work specifically in the high-frequence, algo, quant, ai field.

Renaissance Technologies has existed since the 80's in the field and one of its founders Robert Mercier branched the same technologies they used (in part) outwards as Cambridge Analytica which was used to win an election.

The same technologies (AI) that derive intelligent information can be and are used to coerce the average pleb.

It's the field i've been in from 2002 except a period around 2006-2012.

https://www.rentec.com/Home.action?index=true
Doesn't look like much right?

Last time i had dealings with people that worked for them they had 60 billion $ AUM and it was ALL employee money... average growth then was 40% PA when the street was lucky to get 10-15%.

Someone smarter than me already well explained the point:
https://citeseerx.ist.psu.edu/docum...&doi=6546b8966b31b818cc5954ef8ac4972d53703ffaIf you can prove the contrary, please invite me at the Stockholm Concert Hall on Dec 10 so I can applaude your success.

 

[wellington]

Someone smarter than me already well explained the point:
https://citeseerx.ist.psu.edu/docum...&doi=6546b8966b31b818cc5954ef8ac4972d53703ffaIf you can prove the contrary, please invite me at the Stockholm Concert Hall on Dec 10 so I can applaude your success.

I already proved the point there's no need to argue, when the facts are as clear as day.

You can state x said this or y said that, but the numbers, the entities in the AI / Algo space continue to bank more than tradefi.

Like i remarked when you posted your stocks the other day, and shared our own results (commercial)

Renaissance Technologies, Jane Street, etc etc

Tonnes of firms in the space. you just don't see them standing up because they are all operated by geeks who are naturally hermits lol.

Average returns vs TradeFi are 2-3x in Quant-TradFi
Average returns vs TradeFi are 10x in Exotics

 

[JohnnyDoe]

I already proved the point there's no need to argue, when the facts are as clear as day.

You can state x said this or y said that, but the numbers, the entities in the AI / Algo space continue to bank more than tradefi.

Like i remarked when you posted your stocks the other day, and shared our own results (commercial)

Renaissance Technologies, Jane Street, etc etc

Tonnes of firms in the space. you just don't see them standing up because they are all operated by geeks who are naturally hermits lol.

Average returns vs TradeFi are 2-3x in Quant-TradFi
Average returns vs TradeFi are 10x in Exotics

survivorship bias: https://www.researchgate.net/profil...WQiLCJwcmV2aW91c1BhZ2UiOiJwdWJsaWNhdGlvbiJ9fQ

 

[wellington]

As for the Investment Industry ~ in our case we don't consider ourselves to be in that industry, but are internally considered to be infrastructure financiers.

survivorship bias: https://www.researchgate.net/profil...WQiLCJwcmV2aW91c1BhZ2UiOiJwdWJsaWNhdGlvbiJ9fQ

John, you are not making much sense.

I am telling you and pointing out you are wrong and where to look, but you keep throwing documents and papers written by people that wouldn't even fit in the space you are referring to (not cut out for it).

There you go. Does Quant Fund Performance Outperform Human-managed? | Toptal®

For the record our company goes through some 5,000 tickers before our office opens in the morning culling through.

You'd historically have 1 person per 5 potential trades doing the same.

ergo you don't have humans, you have automation, less dead weight, and higher returns.

And there you go again: Quant Hedge Funds Post Historic Returns in Ugly Year for Wall Street

There isn't ONE trader that works for our firm, it's all automated.

Same goes across the quant space in various degrees.

When you make 15% a year we make 1,500%.

And we don't need investment because we are printing money and thats why you don't see advertisement for open investments.

End of discussion for me, you are wrong on Fact and Substance.

 

[JohnnyDoe]

As for the Investment Industry ~ in our case we don't consider ourselves to be in that industry, but are internally considered to be infrastructure financiers.


John, you are not making much sense.

I am telling you and pointing out you are wrong and where to look, but you keep throwing documents and papers written by people that wouldn't even fit in the space you are referring to (not cut out for it).

I am referring to the stock and financial markets broadly.
I posted scientific papers and examples of Nobel Prize winners who failed.
If you are smarter you should be able to prove it, not just say “I am right and you are wrong”, or “I make one million percent in my worst year”.
That being said, I wish that you keep surviving for many years to come

 

[wellington]

Noriel something is a noble prize winner he just came out with a debasement protected bucket of assets as a static token

Each asset in the bucket looses on avg 2.5_6% against currency debasement.

Like I said these people don’t or won’t cut it in a purely techno-scientific quant space.

And quant is anything from traditional stocks to overseas bonds to crypto to commodities.

All the hedge fund managers I know either quit a long time ago due to restrictions on not being able to take macro positions to hit their quarter or have moved to exotic markets such as blockchain, green tech or space.

So I don’t believe they carry much weight in what they say or what they write.

https://www.ft.com/content/7774da77-048d-4e75-8350-4fec136cb18fNouriel Roubini - Wikipedia - apologies no noble prize.
~ Flat Coin

- Short Term Bonds ~ TBill & Chill
- Inflation Indexed Bonds ~ inflation not debasement proof.
- Gold ~ -4% P/A against debasement 2013-2023
- Green Metals - Probably a solid investment ~ 15% P/A
- Sustainable Real Estate = Avg loss against currency debasement P/A ~ 2.5% (now factor in overleveraged commercial debt wrapped up in retail estate - toxic s**t like 08 derivatives.

I'd hazard over 10 yrs the investors in this chaps shitcoin would loose roughly ~20% at the very least in nominal terms, significantly more in real terms.

Interviewing Ben B who does have a noble prize and has caused the s**t the world economically is going through to this very day.
https://www.ft.com/content/3be78531-a7f9-4045-9ac8-88ca64210f59

 

[JohnnyDoe]

You can become rich with AI for just £35 per month: Alchemist™ Trading Software - Alchemist