Index funds and the investment products for the masses paradox

  1. We should always remember that we are talking about averages. There are always outliers in both directions. Investors who got rich by applying little effort (lucky gamblers) and investors who put a lot of work and still ended up with low returns. But in the long run, these outcomes average out.
  2. The risk/reward/effort principle predicts the dynamics of the expected returns for any given amount of effort only in the long term. One can serendipitously catch a new trend early and benefit from riding it without applying any effort. But over the long term, lucrative fields tend to get overcrowded, and the trends tend to reverse themselves.

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