How about the "accredited investor" limitation?

In order to invest in something that can generate great wealth (eg., a startup, I believe futures, a number of securities), you need the accreditation, which means either making 200K+ US two years in a row, or having 1 mil US in non-primary-household wealth.

Now, one could argue that it's intended to protect people from themselves - the guy or gal mortgaging their house because a snake oil salesman convinced them to invest in something shady. But doesn't it also block off a whole set of possibilities to a select few in the name of protecting the little guy?

Preventing small time retail investors from buying into high risk startups is a good thing. Unfortunately the general public has proven over and over again that they lack the financial sophistication to comprehend the difference between a scam and an investment opportunity. Remember even VCs lose money on a vast majority of deals.

The ICO mania over the last year provided an excellent reminder of why these regulations exist and why they are important.

Since they lack the sophistication to understand they were being scammed...why do you think they would have any understanding of classical valuation models?

That's an extremely elitist, if utilitarian perspective. It doesn't make it wrong. However, consider that having a lot of wealth as a pre-req for obtaining wealth is, of course a circular problem. It's a legalized entrenchment of wealth sort of situation and the justification is, the public good.

No it's not, there are plenty of rags to riches stories (they had to get their wealth in the first place and most wealthy people didn't just stumble upon oil).

On the point of unregulated securities, if you are so interested in investing in them, why don't you just join a VC? Once you make partner, you get your share in the returns and can make a lot more money since you will have way more capitol to invest than the spare change you have in your bank account.

Which part is controversial?

No, generating wealth from wealth is proportional to your wealth. A middle class persons wealth in the sp 500 generates the same percentage returns as that of a billionaires does.

> join a VC

If you really think you can beat the market, then you should join the VCs and you can make a bunch of money IF YOU ACTUALLY CAN ACTUALLY BEAT THE MARKET. However, I HIGHLY doubt you actually can because most people do not and yet there are tons of people like you that think they can especially the most uneducated which is why they are the most susceptible to scams and why we have laws to try and product them because having an economy based on scams has lots of negative externalities.

> does accreditation requirements help or hurt the ability for individuals to ascend economically. It obviously hurts them

Explain?

This is a condescending attitude that keeps people outside the financial class on the fringe and destroys their ability to take control of their lives. If you treat people like children they will forever remain children.

As a struggling low-income millennial, FATCA and accredited investor requirements have easily set me back a decade.

How? Are you wanting to be one of the scammers because those are practically the only people that would get rich if we got rid of these laws? Almost everyone would make less returns than an index fund and a lot would even lose more money to the scams than they would make from the good investments. There would be a few outliers who just got plain lucky but if you want to be one those people, just play the lotto or go to vegas where your odds would be better.

I have a serious disability that is not recognized as such by the government. No one will hire me. I am completely isolated from civil society. The only way I can make money and pay for my medical expenses is to start my own businesses. I can only start businesses in unregulated markets because the barrier to entry is impossibly high elsewhere.

Without Uber/Lyft or cryptocurrency I would probably be dead. Like seriously not alive. Gone. Not existing anymore as a human. So when people whine about how they've been scammed because they made ignorant decisions and got involved with things that they shouldn't have, I do not feel sorry for them. They got greedy, gambled, and lost. That's on them. I am not gambling. I am making legitimate transactions with people who need my services. Just because some people scam does not mean that I am.

What has happened to me just happened through no choice of my own, and it feels like regulators are doing everything they can to keep me down, all in the name of protecting people who refuse to put in the work to make wise decisions. People who have more than me. People who are healthier than me.

If everybody suddenly has a chance to invest in a round, investors will compete on price, bidding up those early-stage valuations and compressing future returns.

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.

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).

The median annual household income in the US is around $60k.

(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.

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.

That is the core problem.

10% YoY for index funds = healthy. Far lower for rigged economy reasons = a large scale societal problem.

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.

[0]: https://en.wikipedia.org/wiki/Economy_of_the_United_States#G...

[1]: https://www.wise-owl.com/investment-education/is-there-a-cor...

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.

[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.

That means there should be more potential buyers, not fewer.

The premise of a shrinking middle class isn't strictly a myth, however it ignores the fact that what is actually happening is that the middle class is moving up faster than the bottom economic tier is expanding. That process is contracting the middle class - it's not contracting due to eg increased poverty, as poverty in the US has gone down over time. The sole reason there has been any net expansion in the bottom economic tier, is due to extreme low skill / low wage labor importation since the late 1970s.

[1] https://www.washingtonpost.com/opinions/is-the-middle-class-...

[2] https://i.imgur.com/TwQhMaT.png

Here is an alternate viewpoint on the “shrinking” middle class: http://www.aei.org/publication/yes-the-us-middle-class-is-sh...

I don't see any reason why the current exchanges pose in any way some kind of problem to the creation of smaller, more healthy, competitive and robust firms.

Yes, there are regulations, and each exchange has a bunch of rules, but that's generally for the benefit of everyone involved. Any kind of decentralized system would have to have rules.

The exchanges do make money, but it's trivial relative to the underlying financial transactions.

I suggest 'the problem' has more to do with globalization and the consolidation of mature industries, and the availability of large, private funds. Both activities have advantage and disadvantages.

Agreed. Kinda. The question is: which is causing which? Or is there something else for which these are symptoms?