Everyday investors have been left out in the cold
From Dr. David Eifrig, Editor, Income Intelligence:
For 200 years, savers and investors had all the power…
Around the time of the Industrial Revolution, everyday folks began investing in businesses for the first time.
When an entrepreneur needed capital to build a factory, a railroad, or a building, he’d appeal to the nation’s investors… folks like you or me who had savings, but not enough time or plans to put that capital to work themselves.
The modern financial system was built around connecting savers’ capital to those who needed it and those who could use it best.
And because there was only so much capital available, demand for it was high. Investors could expect solid returns via interest payments on loans or the upside of public-stock ownership.
Today, the situation has flipped…
A flood of capital has left most everyday investors out in the cold.
It has never been cheaper to start a business – you don’t need to borrow millions to get your idea off the ground. You can start a social network on a credit card and outsource manufacturing to Asia for a few thousand bucks.
On the other hand, if you’re an investor, you may never get the opportunity to invest in these early stage ideas.
Worse, small individual investors are competing with trillions more in capital than there used to be. Global wealth reached $116.9 trillion in 2000… which more than doubled to $280 trillion in 2017, according to Credit Suisse’s “Global Wealth Report.”
All that additional capital has to go somewhere.
And now the wealthiest investors and elite institutions are increasingly locking regular investors out through two “private markets”…
First, innovative startups are simply no longer going public. The next potential Amazon, Google, or Apple instead only takes money from well-off investors in closed-off markets. These markets don’t allow regular investors… yet have trillions of dollars in assets flowing to the best ideas.
Next, and likely even worse, the best companies on the public markets are getting acquired by bigger companies or taken private in buyouts. Forbes has called it “The Incredible Shrinking Stock Market.” In 1995, the U.S. stock market boasted 7,300 publicly listed companies. Today, it has only 3,600…
This means your choices where to put your money in public companies have been cut in half.
And over the past 10 years, more than 10,000 companies have been taken private or bought out globally.
Do you think these institutions and skilled investors are keeping the worst investments for themselves?
Of course not.
They buy the most profitable businesses and best investments, take them private, and keep them out of the hands of everyday, public investors.
This will have a drastic effect on the returns you can earn from your savings in the future. No good businesses means no good returns.
It’s as simple as that.
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