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Except for a lucky few (who get all the attention as if they've cracked a secret code to producing wealth), no one really gets rich from investing. There are t

Except for a lucky few (who get all the attention as if they've cracked a secret code to producing wealth), no one really gets rich from investing. There are two ways to get rich: (1) be smart and work your tail off, or (2) get lucky. Path #1 involves a bit of #2, but not as much as some people might believe. Also, "working hard" doesn't mean going to work and putting in a lot of time/effort day after day; it has more to do with constantly seeking to improve skills that are of value to the world, expanding your network, and doing more with less. That last bit is important: too many people do improve their earning potential significantly over time, but never feel "rich" because they imperceptibly scale their lifestyle and spending patterns to match (or surpass) their increased earnings. At the end of the day, investing should be regarded as a way to simply stretch the money you do make farther (on a long-term scale). That's not to say it can't significantly contribute to one's wealth over time, but without extraordinary luck, investment returns are usually more of a slow and steady multiplier to your own earnings. If you're investing to become rich, you might as well play the lottery.

sokoloff 10y ago
I graduated with a small amount of student loan debt. (I say that only to set an initial condition of negative net worth at age 21.) I am smart and work my tail off, and most of my net worth today is traceable to the following three factors: 1. A solid, strong income from technology work; no gaps in employment. 2. Spending less than I make. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... 3. Investment returns on the surplus that #2 and #1 make available. It's a three-legged stool. Take any of the legs away and it fails to work. I'm at the point now where most years I make more gains in net worth from the market (#3) than I do from #1 and #2 combined. If I had held all of the surplus in cash and bonds, I'd have way less than half of my current net worth. Way less.
pyrrhotech 10y ago
You can get rich from investing without being lucky, just not quickly. 7% returns become very big money over time if you let them ride for a few decades. Of course you have to have some primary income source to be able to save to invest money, but if you can earn 50k per year and save 10k per year in your 401k, you can easily retire a millionaire.
- charlesdm 10y ago
  I know several wealthy people making 5-10% on net worths in excess of $25 to 50m. 10% on $50m is $5m. That's a lot (and plenty to live well).
  - plandis 10y ago
    I literally don't think I've ever spoken with an individual that has $50m in net worth it's certainly not the norm.
    - dpark 10y ago
      Honestly, how would you know? Most people don't talk about their wealth. I'm not aware of ever having spoken with anyone worth $50MM, but it's possible that it's happened. Of course, you're absolutely right that net worth that high is exceedingly rare. This is much smaller than "the 1%".
      - chillwaves 10y ago
        Not only is it rare, but they do not mingle with peons.
        lordnacho 10y ago
        They absolutely do mingle with peons, they just don't tell the peons. One anecdote was when one of these guys went on a UK game show. People in the market who knew him were laughing their heads off at the thought of him doing word and number puzzles. Also, I think they can be approachable. Often they're looking for investments to make, or charities to donate to. Or they have political opinions they want heard. What they don't want so much though is yet another guy who wants their money, so if you do have something to bring to them, it had better be good.
WalterBright 10y ago
See the book "The Millionaire Next Door" about how ordinary people with ordinary incomes get rich. It is not about being smart or lucky.
- charlesdm 10y ago
  You don't get rich (in an acceptable timeframe) by investing. You stay rich by investing (if you do it well), and you keep a good annual yield coming in by investing well.
  - dpark 10y ago
    > You don't get rich (in an acceptable timeframe) by investing In realistic terms, you don't get rich in an acceptable timeframe by any means. You could found a billion dollar business or you could lose your shirt. You could win the lottery or waste a few bucks. You could marry or inherit money, or you more likely could not. There is no reliable path to wealth except investment long term. And even that is infeasible if you aren't fairly high income.
  - WalterBright 10y ago
    Read the book, please. It shows how (non-rich) people do it. It's going for $.25 on Amazon. Anyone can afford it.
    - krallja 10y ago
      It's $7.99 on my version of the Kindle store. Where do you see $.25?
      - sokoloff 10y ago
        Not GP, but there's a used paperback copy of the 1998 version for $0.25: https://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206/ref=sr_1_3?s=books&ie=UTF8&qid=1489338271&sr=1-3&keywords=Millionaire+Next+Door https://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/... (or a used hardcover for $0.02 and a new one for $0.60) It is also likely available for $1.50 in late charges at the public library...

sokoloff 10y ago

I graduated with a small amount of student loan debt. (I say that only to set an initial condition of negative net worth at age 21.) I am smart and work my tail off, and most of my net worth today is traceable to the following three factors: 1. A solid, strong income from technology work; no gaps in employment. 2. Spending less than I make. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... 3. Investment returns on the surplus that #2 and #1 make available. It's a three-legged stool. Take any of the legs away and it fails to work. I'm at the point now where most years I make more gains in net worth from the market (#3) than I do from #1 and #2 combined. If I had held all of the surplus in cash and bonds, I'd have way less than half of my current net worth. Way less.

pyrrhotech 10y ago

You can get rich from investing without being lucky, just not quickly. 7% returns become very big money over time if you let them ride for a few decades. Of course you have to have some primary income source to be able to save to invest money, but if you can earn 50k per year and save 10k per year in your 401k, you can easily retire a millionaire.

charlesdm 10y ago
I know several wealthy people making 5-10% on net worths in excess of $25 to 50m. 10% on $50m is $5m. That's a lot (and plenty to live well).
- plandis 10y ago
  I literally don't think I've ever spoken with an individual that has $50m in net worth it's certainly not the norm.
  - dpark 10y ago
    Honestly, how would you know? Most people don't talk about their wealth. I'm not aware of ever having spoken with anyone worth $50MM, but it's possible that it's happened. Of course, you're absolutely right that net worth that high is exceedingly rare. This is much smaller than "the 1%".
    - chillwaves 10y ago
      Not only is it rare, but they do not mingle with peons.
      - lordnacho 10y ago
        They absolutely do mingle with peons, they just don't tell the peons. One anecdote was when one of these guys went on a UK game show. People in the market who knew him were laughing their heads off at the thought of him doing word and number puzzles. Also, I think they can be approachable. Often they're looking for investments to make, or charities to donate to. Or they have political opinions they want heard. What they don't want so much though is yet another guy who wants their money, so if you do have something to bring to them, it had better be good.

WalterBright 10y ago

See the book "The Millionaire Next Door" about how ordinary people with ordinary incomes get rich. It is not about being smart or lucky.

charlesdm 10y ago
You don't get rich (in an acceptable timeframe) by investing. You stay rich by investing (if you do it well), and you keep a good annual yield coming in by investing well.
- dpark 10y ago
  > You don't get rich (in an acceptable timeframe) by investing In realistic terms, you don't get rich in an acceptable timeframe by any means. You could found a billion dollar business or you could lose your shirt. You could win the lottery or waste a few bucks. You could marry or inherit money, or you more likely could not. There is no reliable path to wealth except investment long term. And even that is infeasible if you aren't fairly high income.
- WalterBright 10y ago
  Read the book, please. It shows how (non-rich) people do it. It's going for $.25 on Amazon. Anyone can afford it.
  - krallja 10y ago
    It's $7.99 on my version of the Kindle store. Where do you see $.25?
    - sokoloff 10y ago
      Not GP, but there's a used paperback copy of the 1998 version for $0.25: https://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206/ref=sr_1_3?s=books&ie=UTF8&qid=1489338271&sr=1-3&keywords=Millionaire+Next+Door https://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/... (or a used hardcover for $0.02 and a new one for $0.60) It is also likely available for $1.50 in late charges at the public library...