[srckinase123]

Thanks for the link. If I remember, there was one Shkreli video where he mentions if you are not working at a hedge fund using large sums of other people's money, then the amount of profit one would make actively investing their own money is not worth the amount of research it takes to make informative investments. Not sure if that is exactly what he said, so don't quote me on it.

What's your take on retail investors and active investing, assuming that the retail investor does not have access to large sums of money.

[ericjang]

> if you are not working at a hedge fund using large sums of other people's money, then the amount of profit one would make actively investing their own money is not worth the amount of research it takes to make informative investments

I think it's worth working out the math for yourself, rather than taking anyone's words for granted. Let's say the average annualized return of S&P500 is 10% (obviously, past returns are no guarantees of future returns). If you buy and hold, then you essentially pay no taxes on your capital gains.

Let's suppose the alternative is to actively trade, and your strategy involves holding securities < 1 year, incurring the maximum short term capital gains of 37%. Let's say your strategy generates an annualized average return of 20%, pre-tax.

So the annualized net worth (after capital gains taxes) starting from $100 would be:

passive: 100, 110, 121, 133

active: 100, 112, 126, 141

So you can generate 10% excess returns, after taxes you compound approximately 2% additional take-home money each year. Then you should ask yourself, is it worth the hassle? Maybe it is. Maybe it isn't. Some people enjoy researching companies, making predictions, and allocating capital to their beliefs.

obviously, there are ways to try and mitigate capital gains taxes - incorporating offshore LLCs, tax loss harvesting, etc. those are important considerations when designing an active trading strategy.

Separately from whether active investing is worth it or not, I think it's valuable to learn how to read financial reports and understand businesses as a projected set of cash flows, along with understanding things like balance sheets and incomes. Learning to read 10-Qs has helped me think of my own budget / personal finance planning much like a business. Financial literacy is super important, even if you are a passive investor.

[srckinase123]

Thanks for laying out the logic so coherently.

The comments by Martin Shkreli I was referring to are actually in the video that you linked. The subtlety in Shkreli's comment is that he was referring to amassing "fortunes". That is where he states that amassing fortunes most likely requires using "other people's money". Which makes sense.

He cites Joe Lewis as an example of a solo investor going from "zero to hero", but I would not say he was strictly an "investor" as he was a currency trader. Also, he had initial wealth from a luxury goods business.

Just for curiosities sake, do you know of any examples of retail investors amassing sizable amount of money starting from very little?