RE: Getting Rich In Crypto Currencies, Real Estate, or the Stock and Option Markets (My Thoughts)
I said that you CAN get rich in Real Estate but that it will take a long time. You have a greater power of leverage with real estate. You CAN'T get rich in the stock and option market basically and why I'm saying this is because no one has ever done it. Sure you can hypothetically say that if someone guessed right on way out of the money calls or puts and kept winning before the options expired and was right 100% of the time for a couple of decades then it would get to the number but there is no way to do that and it has never happened. Most options expire worthless and the person has lost their entire investment on the trade.
So let's take hedge funds and mutual funds as an example. If they can average 20% / year for a couple of decades then that is considered an amazing track record. Warren Buffet averaged 20% / year stretched over decades but that is a totally different situation which I will go into a little later. But let's just use the 20% / year and say that a person is starting with $10,000. Well after year 1 the person has $12,000 after year 2 they have $14,400 and so on and so forth. If you keep working the number out they will die before they end up at multiplied millions even producing an average percentage that is almost impossible to maintain over decades. And with mutual funds and hedge funds they have the power to move the market they are trading so much. Trading $10,000 it is hard to diversify properly which further makes it unlikely to get close to the 20% mark.
Also another thing to consider is that with the stock market the low that it hit in March 2009 was actually lower than the low it hit in October 2002. In crypto the lows have never went lower than the previous low at least so far. So there is that risk with the stock market.
To address the Warren Buffet situation because a lot of people will say that he got rich in the Stock market. Well in 1952 him and Charlie Munger were loaned $100,000. That was a ton of money back then. It would be like a million or more now. They purchased Birkshire Hathaway which was a textile company which ended up failing. So it wasn't like someone today taking $10,000 and trading their way up. They had a large sum to start with and were buying entire companies, buying preferred shares, and dictating executive pay. That isn't something joe blow can do by having $10,000 in a Scottrade account.
This is outside my perimeters I defined of someone starting with $5,000 or $10,000 and trading their way up but a person could try to say that hedge fund managers got rich in the stock and option markets. Just because you could say they weren't rich but then by virtue of being able to trade hundreds of millions of dollars and taking a percentage of the earnings that could turn into multiplied millions. But that isn't the same situation. But yeah Jim Cramer was able to do that I guess you could say and averaged 24% at his hedge fund for a decade and you could say that took him from not being rich to being rich.
The point is that a person can't take $10,000 and trade themselves to multiplied millions in the stock or option market. The only way to conjure the number up would be like saying that a person could win the power ball jack pot 5 times in their life time. Technically you could say that it would be "possible" but it isn't going to happen.