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Part of the argument here is that the top 1% has access to investment classes that have high yields and and which are not available to the remaining 99%. There

Part of the argument here is that the top 1% has access to investment classes that have high yields and and which are not available to the remaining 99%. There is one obvious, government mandated reason that the 99% don't have access to high-yielding investments such as hedge funds: Investors in these funds are required to be accredited investors. This means they must be already wealthy by law. For example, while researching I've found a hedge fund that makes small business loans and yields 11% with no risk to capital. But in order to invest, one must be accredited, which means they have $1,000,000 of net worth outside of their home equity, or, have earned at least $200,000 household income in each of the last 2 years, or, have earned at least $300,000 last year. So by law, the 99% (I am using that term somewhat loosely here) is not legally permitted to take advantage of high-yielding opportunities. Thanks to the Web and Internet tech in general, opportunities are becoming available. For a $2,500 minimum, any investor can put money into peer lending and earn >10%. But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. It's actually a pretty involved effort for the majority of the population to become wealthy. Involved in that there is a lot that needs to be understood about earning, budgeting, saving and investing. That knowledge then needs to be applied for the long term (decades), and then one must hope that there is no divorce, illness or major college bills that can derail a well-run effort.

RyanZAG 11y ago
Agreed. Well meaning but idiotic regulation is nearly always the root cause of systemic market failure. "Oh those poor poor people, we can't let them do what they want - what if they hurt themselves? Let's stop them from doing that!" Best example are drugs like marijuana or even the limits on high fat foods - which research is now showing is not as bad as some other older research thought.
- dgellow 11y ago
  > even the limits on high fat foods - which research is now showing is not as bad as some other older research thought. Sources please.
lquist 11y ago
" I've found a hedge fund that makes small business loans and yields 11% with no risk to capital. " A down market will show you what kind of losses make that kind of return possible in an up market.
- riggins 11y ago
  BTW if you could really earn 11% with no risk of principal loss ... Just borrow as much as you can and collect the interest spread ...
  - Slothrop99 11y ago
    To get that loan, you actually need the money that would make you an "accredited investor"?
- throweway 11y ago
  That baby should be wrapped up in a AAA CDO! Disclosure. Everything I know about cdos are from the big short movie.
mindcrime 11y ago
But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. This is so true, and yet so many people overlook this point. I was fairly unaware of it myself for many years, but looking back on it, I now realize that when I graduated high-school, I knew essentially nothing about investing, stocks, bonds, even compound interest. I thought (like a lot of other poor people did and probably still do) that most of those things were "for rich people". That is, there's a perception that you have to already be rich (or at least, not poor) to benefit from Wall Street. In hindsight, and given changes since my youth, that's totally not true. With services like Sharebuilder and/or low-fee online brokerages like e-trade or Schwab, almost anybody who isn't literally dead-broke can invest in the stock market and benefit from the mechanisms of capitalism. Everybody keeps engaging in this false dichotomy between "Capital" and "Labor" when, in reality, most laborers do own at least limited amounts of capital, and they have the option to invest that and let it grow. But... how many of them know that that is possible, or know how to evaluate investments wisely, or understand why people say "put your money in index funds and leave it there", etc. Assuming the average Joe Blow who graduates from the public school system receives approximately the same kind of financial education I did (which is to say "almost none") then the percentage of average Americans with that kind of financial knowledge is probably staggeringly low. All of that said, this article makes an excellent point about how poor people are cut off, by law, from certain classes of investments. So basically, you're being penalized for being poor in the first place! But it seems that most people would rather avoid substantive discussions about issues of this nature, and instead just run around talking about "Robber Barons" and how evil "the 1%" are, and promoting socialist-like policies.
- sosuke 11y ago
  Compound interest is a joke for the 99%. My savings account gives me 0.65% interest I think? http://xkcd.com/947/ http://xkcd.com/947/ However when you start having millions on 10% interest you start talking real money, at least from the perspective of the person who will never have that kind of investment.
  - mindcrime 11y ago
    That was just one example though. And it's a quirk of the current moment-in-time that interest rates have been hovering around historical lows for some time now. But I stand by my overall point that lack of financial knowledge and wherewithal is a significant factor that inhibits upward mobility.
qaq 11y ago
"hedge fund that makes small business loans and yields 11% with no risk to capital." On what planet making loans has no risk to capital let alone small business loans :)?
- justincormack 11y ago
  The OP has clearly drunk the hedge fund kool-aid, and has no idea how investment really works. The funds have been trying to get wider access so they can sell their largely extremely poor returns to a wider audience.
myroon5 11y ago
Which peer lending platforms allow anyone to invest? I was interested in Upstart but I believe even that is only open to accredited investors unfortunately.
- lightbendover 11y ago
  Plenty allow retail investors, e.g. Lending Club and Prosper. That said, I can't really advise participating as a retail investor since institutional investors employ technology (that you have no access to) in order to instantly scoop up loans that pass their models (which you also have no access to).
jabl 11y ago
> But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. Well, and disposable income/assets. If you don't have significant savings, and your income goes to food, housing, and other daily necessities as it does for most people we consider poor, it doesn't really matter if you're a closet Warren Buffet, does it?
newman314 11y ago
What is the name of this fund that earns 11% with no risk to capital?
WalterBright 11y ago
"I've found a hedge fund that makes small business loans and yields 11% with no risk to capital." Sure that wasn't Bernie Madoff's fund (it returned around 12% a year)?
hooande 11y ago
But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. Wealth = Access + Capital. Getting in early on the Facebook IPO is going to beat the hell out of saving your pennies, but you can only do that if you're part of a select group and already have money to invest. The same is true for all of the other truly high yield investments. Anyone can make money by saving, but it's trivial compared to what people make from extracting various rents. So if the 1% or 0.1% or whatever is defined loosely as people with an income of $250,000/year, I don't see how any amount of saving or investing will get me there if I currently make $50,000/year. If I'm a genius investor and I earn 30% or 40% a year, it's still difficult to get up to $250k in total annual income. What separates the 1% from the 99% is a lifetime of things gone right instead of wrong. Born to the right parents, accepted by the right organizations, in the right place, at the right time. If earning, budgeting, saving and investing were all it took then everyone would be a millionaire. Adding randomness into the system changes the rules, and the expected outcomes.
codingdave 11y ago
Those funds are not "no risk". There is no such thing. And that is why it requires you to be accredited - so that people who do not have the experience in making and/or managing their money will not be taken in by false advertising, risk their entire life savings, lose their entire life savings, and be broke. Is it the best solution to that problem? Maybe not... but if you want to change those laws, you need to come up with an alternative solution to the problem.
wwwdonohue 11y ago
"But I believe what really separates the 1% from the 99% is financial knowledge more than anything else." Why was Alan Greenspan wrong?

RyanZAG 11y ago

Agreed. Well meaning but idiotic regulation is nearly always the root cause of systemic market failure. "Oh those poor poor people, we can't let them do what they want - what if they hurt themselves? Let's stop them from doing that!" Best example are drugs like marijuana or even the limits on high fat foods - which research is now showing is not as bad as some other older research thought.

dgellow 11y ago
> even the limits on high fat foods - which research is now showing is not as bad as some other older research thought. Sources please.

lquist 11y ago

" I've found a hedge fund that makes small business loans and yields 11% with no risk to capital. " A down market will show you what kind of losses make that kind of return possible in an up market.

riggins 11y ago
BTW if you could really earn 11% with no risk of principal loss ... Just borrow as much as you can and collect the interest spread ...
- Slothrop99 11y ago
  To get that loan, you actually need the money that would make you an "accredited investor"?
throweway 11y ago
That baby should be wrapped up in a AAA CDO! Disclosure. Everything I know about cdos are from the big short movie.

mindcrime 11y ago

But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. This is so true, and yet so many people overlook this point. I was fairly unaware of it myself for many years, but looking back on it, I now realize that when I graduated high-school, I knew essentially nothing about investing, stocks, bonds, even compound interest. I thought (like a lot of other poor people did and probably still do) that most of those things were "for rich people". That is, there's a perception that you have to already be rich (or at least, not poor) to benefit from Wall Street. In hindsight, and given changes since my youth, that's totally not true. With services like Sharebuilder and/or low-fee online brokerages like e-trade or Schwab, almost anybody who isn't literally dead-broke can invest in the stock market and benefit from the mechanisms of capitalism. Everybody keeps engaging in this false dichotomy between "Capital" and "Labor" when, in reality, most laborers do own at least limited amounts of capital, and they have the option to invest that and let it grow. But... how many of them know that that is possible, or know how to evaluate investments wisely, or understand why people say "put your money in index funds and leave it there", etc. Assuming the average Joe Blow who graduates from the public school system receives approximately the same kind of financial education I did (which is to say "almost none") then the percentage of average Americans with that kind of financial knowledge is probably staggeringly low. All of that said, this article makes an excellent point about how poor people are cut off, by law, from certain classes of investments. So basically, you're being penalized for being poor in the first place! But it seems that most people would rather avoid substantive discussions about issues of this nature, and instead just run around talking about "Robber Barons" and how evil "the 1%" are, and promoting socialist-like policies.

sosuke 11y ago
Compound interest is a joke for the 99%. My savings account gives me 0.65% interest I think? http://xkcd.com/947/ http://xkcd.com/947/ However when you start having millions on 10% interest you start talking real money, at least from the perspective of the person who will never have that kind of investment.
- mindcrime 11y ago
  That was just one example though. And it's a quirk of the current moment-in-time that interest rates have been hovering around historical lows for some time now. But I stand by my overall point that lack of financial knowledge and wherewithal is a significant factor that inhibits upward mobility.

qaq 11y ago

"hedge fund that makes small business loans and yields 11% with no risk to capital." On what planet making loans has no risk to capital let alone small business loans :)?

justincormack 11y ago
The OP has clearly drunk the hedge fund kool-aid, and has no idea how investment really works. The funds have been trying to get wider access so they can sell their largely extremely poor returns to a wider audience.

myroon5 11y ago

Which peer lending platforms allow anyone to invest? I was interested in Upstart but I believe even that is only open to accredited investors unfortunately.

lightbendover 11y ago
Plenty allow retail investors, e.g. Lending Club and Prosper. That said, I can't really advise participating as a retail investor since institutional investors employ technology (that you have no access to) in order to instantly scoop up loans that pass their models (which you also have no access to).

jabl 11y ago

> But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. Well, and disposable income/assets. If you don't have significant savings, and your income goes to food, housing, and other daily necessities as it does for most people we consider poor, it doesn't really matter if you're a closet Warren Buffet, does it?

newman314 11y ago

What is the name of this fund that earns 11% with no risk to capital?

WalterBright 11y ago

"I've found a hedge fund that makes small business loans and yields 11% with no risk to capital." Sure that wasn't Bernie Madoff's fund (it returned around 12% a year)?

hooande 11y ago

But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. Wealth = Access + Capital. Getting in early on the Facebook IPO is going to beat the hell out of saving your pennies, but you can only do that if you're part of a select group and already have money to invest. The same is true for all of the other truly high yield investments. Anyone can make money by saving, but it's trivial compared to what people make from extracting various rents. So if the 1% or 0.1% or whatever is defined loosely as people with an income of $250,000/year, I don't see how any amount of saving or investing will get me there if I currently make $50,000/year. If I'm a genius investor and I earn 30% or 40% a year, it's still difficult to get up to $250k in total annual income. What separates the 1% from the 99% is a lifetime of things gone right instead of wrong. Born to the right parents, accepted by the right organizations, in the right place, at the right time. If earning, budgeting, saving and investing were all it took then everyone would be a millionaire. Adding randomness into the system changes the rules, and the expected outcomes.

codingdave 11y ago

Those funds are not "no risk". There is no such thing. And that is why it requires you to be accredited - so that people who do not have the experience in making and/or managing their money will not be taken in by false advertising, risk their entire life savings, lose their entire life savings, and be broke. Is it the best solution to that problem? Maybe not... but if you want to change those laws, you need to come up with an alternative solution to the problem.

wwwdonohue 11y ago

"But I believe what really separates the 1% from the 99% is financial knowledge more than anything else." Why was Alan Greenspan wrong?