
Why the rich stay rich: they don’t invest like the rest - kimonos
http://www.bbc.com/capital/story/20140501-how-the-rich-stay-rich
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QuantumChaos
I was expecting evidence that the assets that rich people invest in actually
give better returns. None was given.

There were some vague claims of "alpha" to be found in specialty asset
classes. But then, if your job is to find "alpha", then you are probably going
to claim that it is out there somewhere.

In the absence of any new evidence, I'm going to stick to my previous opinion,
which is that there are no superior investment opportunities available to the
rich. People might get rich by luck, skill, or political influence. But having
lots of money doesn't guarantee higher average returns on that money.

~~~
sokoloff
It doesn't guarantee it, but I've noticed even with myself (by no means
"rich") that as soon as the money didn't matter (in any near-term sense), I
became a better investor.

It's the same as playing no-limit poker. If I'm playing my best, I'm playing
in a way that I think of the chips (money) as a tool. As soon as I start
thinking about it as spendable money, I might as well get up, because I'm not
going to be playing at my best.

I can readily imagine that the rich get superior returns by finding solid
financial prospects that aren't accessible to Joe Main Street who can't afford
to tie up $1MM for years.

What I see happening in the Florida real estate market, where PE/hedge funds
are vacuuming up foreclosed properties is exactly the type of "smart money"
investments differentially available to rich people. (Sure, there are REITs,
which are accessible, but there someone is already fattening themselves up on
part of the profits from the activity.)

So, not all of these are guaranteed high-alpha investments, but I find it hard
to imagine that there aren't pockets of alpha out there that are
preferentially accessible to the rich.

The article is a media play-pageviews and ad shows is the primary purpose, not
winning a Pulitzer Prize...

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cylinder
Wow, the rich can get returns of 9% and 4% on high-risk undiversified
investments. Big deal. Average Joes can invest in farmland and equipment lease
through stocks, ETFs, REITs, etc. anyways.

