Investing in the stock market used to be one of the surest places to put your money in the last couple hundred of years. That is, low risk, low reward option, via buying the indexes. But now, that is increasingly becoming higher risk, and lower reward. The previous history suggests indexes returning around 9% per year on a gross basis. This would be before any inflation and taxes. So now if you add in taxes, let’s say you pay an estimate of 20–25%. So your take home would be around ~7%. But during periods of more money printing, the inflation rate could be higher than the government’s wish of 2–3% per year. Currently post pandemic, inflation being reported is around 8–9%. That means, on a real return basis, you are actually losing money by putting money into the stock market. I guess the only solace is that you aren’t losing as much if you had held it in straight cash. Even if inflation slows down to a more moderate 4–5% on a long-term basis, it means on a real basis, you are making 2–3% per year. So according to the rule of 72, that means it could take you 24–36 years just to double your money. Wow. And the worst part is that everyone around you is probably doing the same thing, and consequently, congratulating you on this decision as everyone else is doing it.

There have even been estimates that following all the conventional wisdom in life will not lead to golden years in your old age. Whilst the previous generations may have been able to retire at the ages of 60–65, it’s now estimated that following conventional wisdom and life choices, at least financially speaking, will actually lead to you not ever being able to retire. Can you imagine working as a greeter in your 70s? You simply don’t have the money to choose otherwise.

What’s worse is that this was all based on past society, where technology and the pace of change was either nonexistent or very slow. Fast forward to the 21st century, and the pace of change, and technological advances, is now faster than ever before. This means, companies that are considered safe blue chips, are now at higher risk of being displaced by new, faster, cheaper and better innovative companies. That means your money locked away in “safe” investments, is now less safe than ever. For instance, in the 1950s, a company’s average life span in the S&P 500 was 61 years. Today, it is less than 18 years. Some companies even estimate that in the 2030s decade, a company will only stay in the index for 10 years, and that 75% of the current 500 S&P companies could be shifted out of the index. Even more, it’s predicted that perhaps 40% of companies in the S&P 500 in 2035 have not even been formed yet. Wow again.

I don’t know about you, but when I see these data points, it suggests to me that new companies can rise faster than ever, and the “blue chips” could fall faster than ever before. The old age industrial thinking no longer works in this new information, technology-based economy. If 40% of the companies in the S&P don’t even exist today, that means, if you bought into new budding startups, 200 of them will become a very large and valuable company, serving millions and millions of people with useful innovative products and services. You literally only need to be right once, on even small dollar values to get life changing money.

Odd how we are constantly bombarded to save 10–15% of our income and invest it into a low-risk ETF or index on the stock market. And how has that turned out for the majority of people, who are saving minute amounts of money each month? By not promoting startups, it allows all the money to be invested by the hands of a few. Angel investing could truly be one of the best kept secrets that us average joes are not taking advantage of.

Disclaimer

This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.