The fact is that people have gotten rich solely through investing in financial markets. However, the actual numbers are few when compared to all who've tried.
The "investment genius" who gave you an earful at that social gathering last weekend may have left out some crucial details about his trading history:
"There is a myth, held by nearly all people outside of back-office employees of brokerage firms and the IRS, that many people do well in financial speculation. Actually, almost everyone loses at the game eventually. The head of a futures brokerage firm once confided to me that never in the firm's history had customers in the aggregate had a winning year. Even in the stock market, when the public or even most professionals win, it is a temporary, albeit sometimes prolonged, phenomenon. The next big bear market usually wipes them out if they live long enough, and if they do not, it wipes out their successors."
-- Bob Prechter, The Wave Principle of Human Social Behavior, p. 162.
So the next time you take a small profit, or even a loss, don't feel like everyone else is getting rich in the market -- except you. Actual brokerage records prove otherwise. Just outperforming money market rates over a multi-year period can be an investment achievement. But then comes the crash of '87, or the bursting of the internet bubble, or the 2007 crash -- and years of careful portfolio nurturing is for naught, except for market education.
This challenge is not just confined to the amateur.
"The evidence from decades of academic research is that only a small percentage of investors outperform the market over the long term. The quest for the 'Holy Grail' of outperformance has mostly proven to be counterproductive. Tens of billions of investor dollars are spent (wasted) every year in an effort to identify and hire managers who are expected (but most often fail) to deliver market-beating returns. And tens of billions more are spent by individual investors trading on their own in a similarly ill-fated effort."
-- CBS MoneyWatch, May 26
In the stock market, when the public or even most professionals win, it is a temporary!
