> Most investors have poor returns because they defer to their self-defeating cognitive biases, they don't take the time to understand investing, and they often naively believe they have a simple "system" which will outsmart the market.

The article you cite directly contradicts this. It claims that investors who have the best returns are those who specifically don't take the time to understand investing, and that there very much is a simple "system" that works, namely, forget about your investment account entirely, or at least let it sit dormant for a few decades and do nothing.

More to the point, your comment smells like justifying the wealth disparities, and counters the WP article ("If you start out with wealth, you don’t have to be a financial genius to tap the miracle of compounding and end up with real money.") with... nothing but a vague claim that smart investors can make a lot of money.

The article completely supports my point, in showing how awfully the average investor does compared with the buy and hold investor.

https://www.bloomberg.com/news/articles/2014-07-23/don-t-tel...

http://www.npr.org/2013/04/09/176579895/to-find-insider-trad...

It's the equivalent of poking the market with a stick with a pavlovian response when there's several academic fields that would explain a great amount for you instead (which was expensive before the internet).

The only alternative that makes sense to me is to follow Peter Lynch's advice and buy what you know. Do this with money you can afford to lose.

When Apple released the original iPod I begged my Dad to buy me one and raved about it. Based on my excitement, he bought several thousand shares of aapl and still holds them. The gain on that single investment is greater than all the income he earned in his lifetime. You cannot expect to make these kinds of investments. Take a sliver of what you have and put it behind something you believe in. Put the rest in index funds.

Edit: I meant to tie this comment back to the original title about wealth disparity. Point being, my Dad has created generational wealth from a single lucky investment. It's just luck and a system that let's you keep your winnings.

I had to read it several times as I thought I was misreading it. I have many other anecdotes on that point, but that one takes the cake.

It is not the strategy with the optimal use of money, but if you feel defeated because you seem to be making no progress then you are less likely to have the motivation to live frugally, and thus actually​ do worse overall.

It can be more important to encourage yourself than to actually optimize your cash depending on your personality and situation.

I recommend again "Thinking Fast and Slow"'s section on how cognitive biases interfere with sound money management. Being aware of them can be very helpful in countering one's own unhelpful tendencies. Interestingly, the book details how professional money managers fall victim to them, even when they are made aware of such biases.

This is one aspect where computer algorithmic investing can do better. One can dispassionately program out such biases.

We have structures and systems that use your cognitive blind spots to strip you of any wealth you might have been able to accumulate.

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.

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-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.

Of course, you're absolutely right that net worth that high is exceedingly rare. This is much smaller than "the 1%".

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.

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.

It is also likely available for $1.50 in late charges at the public library...

The used paperback version is $0.25

If your goal is to get rich or a significant share of the market then just be like Buffett: brilliant at risk estimation and a real eye for spotting value in the market. Of course, that experience takes years to acquire.

http://www.nytimes.com/interactive/2011/01/02/business/20110...

Suppose a long now charity whoes goal is interplanetary colonies once it hits 10% world resources it starts spending dividends.

I know lower middle class people that have, if by rich meaning their stocks are well into 7 figures. Few, however, have the patience to stay the course for decades, and fortitude to gut out the various crashes.