Just what barrier to investing in the stock market is there, besides for having money to invest? It's easy to setup an IRA or 401K or just setup your own brokerage account.
The median annual household income in the US is around $60k.
Even if investors shouldn't pick stocks, it might be wise for them to invest in an index of companies that they are now prevented from investing in.
Returns from private companies go up -> more VCs enter the market with higher returns increasing competition -> valuations get higher (meaning founders/employees get to keep more stock while investors get less) -> returns deflate and we are back at a balance.
There is a reason VCs have been complaining about sky high valuations and it's because most VC's don't even beat the sp 500.
The returns in those index funds are driven primarily by growth stocks.
[1] I assume due to the prevalence of venture capital; that absorbs the returns of early startups.
Also, it creates a two-tiered system with self-perpetuating A and B economic classes, rather than a merit-based free market that allows social and economic mobility and opportunity. Generally, that is seen as antithetical to democracy and to American values in particular (not to exclude other countries).
(Yes, growth equity is a category of private equity, but it's a developing middle ground between VCs and more traditional PE which is usually focused on cost cutting and loading up on debt to juice returns from mature companies.)
Edit: Got to like the down voters who think individual investors should be out picking stocks. Even though experts and basic investing advice tells people they should not be picking individual stocks.
That is the core problem.
10% YoY for index funds = healthy. Far lower for rigged economy reasons = a large scale societal problem.
[0]: https://en.wikipedia.org/wiki/Economy_of_the_United_States#G...
[1]: https://www.wise-owl.com/investment-education/is-there-a-cor...
What do you mean? The current market has many problems but recent returns being low is not one of them (of course returns going forward are something else entirely).
S&P 500 total returns (annualized) are:
17% over the last one and two years
13% over the last three and five years
11% over the last ten years
9% over the last eleven years (roughly corresponding to the peak of the previous bull market)
https://www.marketwatch.com/story/a-quarter-of-sp-500s-2017-...
Take them out and you're much closer to the historical 10% return, and that's in a bull market.
But if understand correctly, HashThis' claim is that the market is not even returning the historical 10% average.
Something like Wilshire Index returns 7% CAGR over the last 20 years. Interestingly, Russell and Dow are about the same 7%.
As the economy becomes ever more permanently unequal, the concept of one number representing inflation becomes less meaningful because there is no longer one standard of living or one cultural expectation. Something like M2 is 14000 now and 4000 in 98 so thats 6.4% annually. After tax the Wilshire would only return maybe 3% or so, minus 6.4% inflation, whoops... Or you could use the famous Big Mac price index which is about 2.8% over the same time period, leading to a very slight profit of a fraction of a percent. Are you part of the separate subset of society that lives off M2 or off big macs or ...?
So investing in "the market" depending on hand waving provides a modest negative to approximately zero return. If you can pick the subset of winners in advance, the SP500 is quite profitable, although if you can pick winners in advance there's probably more profitable things to predict.
Also remember the market can remain irrational longer than you can remain solvent over all values of "irrational" or "solvent" or "longer". I have a medical insurance bill to pay next month, not over ten twenty or hundred year average. Pulling out a constant sales price from the market to live draws down a balance faster than pulling out a constant small percentage of total value over a long time period.
Then of course there's long term demographic issues. The USA is supposed to be richer in the future because... why exactly? You might get a bigger slice of the pie, but theres no particular reason to expect the pie overall to expand.
Another thing you may find surprising: the long-term historical average return for small cap indices is higher than for large cap indices.
When you invest in the SP500 and companies drop out of it, your investment in those companies ALSO drops out.
And the publicly stated "return" of the SP500 takes this into account.
Even more simply, just imagine how the market might look different if you could invest in a VC. You don't pick startups, you pick a VC- kind of like picking a fund today.
There are ETF's for everything today. If more small companies were available on public equities markets, then they would be included in a variety of different ETF's. The problem is that today you need to be an "accredited investor" to buy any of the high-growth potential private companies' equity, and even then, the best companies are usually raising capital from a small number of people and organizations.
This means the majority of the high growth in equities markets is captured by high-wealth individuals, and private organizations owned and operated by high-wealth individuals. Without strong connections, it's difficult to gain access to any solid high-growth private companies.
The days where the economy was relatively stable and large companies had wide moats against competition are largely over. The last 15 years has seen a large number of huge household names go bankrupt entirely, from Kmart to Sears to Toys'r'us to Chrysler to GM to MCI/Worldcom to Bear Stearns to Lehman Brothers to Wachovia to virtually every airline. Many more are now at risk, from Visa & Mastercard to Walmart to every hotel chain.
All of these huge returns for private tech companies are coming at the expense of their competitors, which are largely the big public companies that many people have their retirement money invested in.
[1]: https://www.thebalance.com/index-funds-vs-actively-managed-f...
The answer is not to do the same thing that’s been done for the last several decades. That’s insanity. The solution is to empower the individuals.
People don't want that, they want to get rich quick. See the recent (bit)coin hype train(s).
And to top that off most of the people are absolutely without disposable money. They don't even have rainy day savings, and talking about investment portfolios is laughable. Again, millions are without basic health care and we want to make empower the individual.
Yeah, let's do that, but before turning everybody into an junior investment banker on coke let's educate folks. (That'd help with having a middle class again too.)
The assertion that Americans do not, on average, have money to invest is a false one.
That is the exact barrier of entry I'm referring to. Ballooning stock prices of well-performing stocks and shrinkage of the number of listed companies in a stock market narrow the opportunities for middle-class investors.