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If you think anyone can make the same investments then you don't know finance very well. The highest earning investments require huge amounts of cash to partic

If you think anyone can make the same investments then you don't know finance very well. The highest earning investments require huge amounts of cash to participate in and they are not a matter of simply holding some stocks.

sp332 11y ago
Either way, the difference is how much capital you start with.
- jcoffland 11y ago
  My point is that this is not the case. If you have more capital you can earn a higher percentage on that capital.
  - sp332 11y ago
    It makes it clear that there is a step function: either you are rich enough to make money, or you aren't.
    - jcoffland 11y ago
      I can agree with that.
nugget 11y ago
I don't think this is true any more. If you buy and hold index ETFs you'll outperform the majority of professional investors due to the very low expense ratios. Some people with lots of influence like Warren Buffett or David Swensen @ Yale have access to slightly better risk-reward adjusted opportunities but that's a very small group of folks. Even Warren Buffett has instructed his estate to keep its assets in SPY the S&P 500 index fund after his death. Every time you hear about wealthy people earning a huge return on an investment just remind yourself that risk-reward is baked into almost everything in the markets and what you're not seeing is the many other investors who chased similar investments but lost.
- sp332 11y ago
  We don't know exactly how few people are making all the money at the top. The article only gives us 1% granularity, but maybe it is "a very small group of folks" who are bringing up the average.
- jcoffland 11y ago
  You're not considering arbitrage trades which is where the earnings are disproportionate to the risk because such trades require a huge amount of capital and a lot of expertise to take advantage of.
prostoalex 11y ago
Do those investments consistently outperform S&P 500 and Russell 2,000? I think you can always cherry-pick some real estate deals or angel investments in Google, Inc. that were available to accredited investors and returned superb results, but through survivorship bias skip deals like Las Vegas Monorail, Greek bonds and angel investments in Fab.com and Color. If you can find a way to consistently outperform the index funds, you can find a way to securitize it and make it available to smaller-tier investors. The fund have "absolute return" or "unconstrained" somewhere in its name and join a long list of funds that were unable to outperform index funds for statistically significant periods of time.

sp332 11y ago

Either way, the difference is how much capital you start with.

jcoffland 11y ago
My point is that this is not the case. If you have more capital you can earn a higher percentage on that capital.
- sp332 11y ago
  It makes it clear that there is a step function: either you are rich enough to make money, or you aren't.
  - jcoffland 11y ago
    I can agree with that.

nugget 11y ago

I don't think this is true any more. If you buy and hold index ETFs you'll outperform the majority of professional investors due to the very low expense ratios. Some people with lots of influence like Warren Buffett or David Swensen @ Yale have access to slightly better risk-reward adjusted opportunities but that's a very small group of folks. Even Warren Buffett has instructed his estate to keep its assets in SPY the S&P 500 index fund after his death. Every time you hear about wealthy people earning a huge return on an investment just remind yourself that risk-reward is baked into almost everything in the markets and what you're not seeing is the many other investors who chased similar investments but lost.

sp332 11y ago
We don't know exactly how few people are making all the money at the top. The article only gives us 1% granularity, but maybe it is "a very small group of folks" who are bringing up the average.
jcoffland 11y ago
You're not considering arbitrage trades which is where the earnings are disproportionate to the risk because such trades require a huge amount of capital and a lot of expertise to take advantage of.

prostoalex 11y ago

Do those investments consistently outperform S&P 500 and Russell 2,000? I think you can always cherry-pick some real estate deals or angel investments in Google, Inc. that were available to accredited investors and returned superb results, but through survivorship bias skip deals like Las Vegas Monorail, Greek bonds and angel investments in Fab.com and Color. If you can find a way to consistently outperform the index funds, you can find a way to securitize it and make it available to smaller-tier investors. The fund have "absolute return" or "unconstrained" somewhere in its name and join a long list of funds that were unable to outperform index funds for statistically significant periods of time.