I'd love to get your thoughts on selling shareholder voting rights as a way to generate passive income. At SVE (https://svegroup.com), we're building the first exchange for buying and selling shareholder votes. Let me know what you think!
The point I was trying to make here is not about average intelligence or even just the average person. I meant that the average person that is able to invest the recommended 10-30% of their income into index funds will have a very difficult time breaking the 5 million barrier. Even increasing the savings rate doesn’t change much if you are not making at least several hundred thousand a year, in which case you are now in the top 5% of income earners in the US
Generally no, the amount of funds available does not affect returns if you are only speaking in terms of index funds. Wealthy people have access to far more investment vehicles, but that doesn’t necessarily mean they are all good vehicles for creating wealth. Much of the time hedge funds or other investments are meant to preserve wealth more so than generate it. The one exception I would say is that private equity has very good returns. That doesn’t really surprise me since private equity is able to buy companies at valuations you could almost never get on the stock market. On the other hand though, poor/middle class folk have an easier time deploying capital. When you only have a few thousand or even a few million your investments will not move the market. Therefore you don’t have a deployment issue. Wealthy people very often are able to move the market with their purchases or sales and need to be much more careful deploying capital.
Great article! New investors tend to conflate index and passive investing, but hidden turnover can be quite substantial, as you point out. I previously wrote about these kinds of problems over here: https://www.svegroup.com/education/limitations-of-passive-investing
I'd love to get your thoughts on selling shareholder voting rights as a way to generate passive income. At SVE (https://svegroup.com), we're building the first exchange for buying and selling shareholder votes. Let me know what you think!
> Your Net Worth Is Capped At Around 5 Million For The Average Person
Question 1: Is it possible that the average passive indexer is not part of the mean (since it is more middle class ish)? https://ifstudies.org/blog/can-intelligence-predict-income https://pumpkinperson.com/2014/11/09/hypocrites-who-deny-linear-iq-income-correlation/
Question 2: Does the amount of funds available affect peak returns (e.g. leverage, risk tolerance)?
Thanks for commenting!
The point I was trying to make here is not about average intelligence or even just the average person. I meant that the average person that is able to invest the recommended 10-30% of their income into index funds will have a very difficult time breaking the 5 million barrier. Even increasing the savings rate doesn’t change much if you are not making at least several hundred thousand a year, in which case you are now in the top 5% of income earners in the US
Generally no, the amount of funds available does not affect returns if you are only speaking in terms of index funds. Wealthy people have access to far more investment vehicles, but that doesn’t necessarily mean they are all good vehicles for creating wealth. Much of the time hedge funds or other investments are meant to preserve wealth more so than generate it. The one exception I would say is that private equity has very good returns. That doesn’t really surprise me since private equity is able to buy companies at valuations you could almost never get on the stock market. On the other hand though, poor/middle class folk have an easier time deploying capital. When you only have a few thousand or even a few million your investments will not move the market. Therefore you don’t have a deployment issue. Wealthy people very often are able to move the market with their purchases or sales and need to be much more careful deploying capital.