Middle Class: Chips Are Stacked Against You

[Jon Q.]

If you are middle class in America and you depend on W2 income for a living, the chips are stacked against you.

1. Why are Americans who work for a living taxed more than investors who live off of their investments?

2. Why is the average return that you're able to generate in public mutual funds less than 5% annually (arguably less, much less) with high fees and how can you generate real wealth by investing in these funds?

3. Why do SEC regulations that "protect" the middle class also prevent them and allow only "accredited investors" (aka rich people) the ability to invest in private investment opportunities?

Full disclosure: through these opportunities, you may lose money, but you also may generate significant above market returns. There are also opportunities that are able to generate above market returns, but manage risks/downside effectively. The reality is, investing in private investment opportunities is how a large percentage of the rich get rich and stay rich. I know wealthy investors who are able to generate 20-30% returns annually. The SEC has effectively taken your investment rights away in the guise of "protecting you".

U. S. tax policy and securities regulation make it very difficult for the middle class to save and grow wealth. These policies help the rich get richer and the poor stay poor.

Though difficult, wealth development is not impossible. By understanding the policies and regulation, starting where you are now, you can develop wealth. 

[Anthony Gayden]

I don't truly believe the chips are stacked against you if you are a middle class W2 wage earner. Actually that describes me, and a lot of the other people on this website.

1. Why are Americans who work for a living taxed more than investors who live off of their investments?

Actually this is one of those arguments that I often have with my family. There is nothing to say that a middle class person can not take advantage of these exact same tax breaks. That is why I invest in real estate and why I invest long term in the stock market. Capital gains is way less than income tax. By taking away these tax breaks, you actually would be hurting millions of middle class investors far more than you would be hurting the rich.

2. Why is the average return that you're able to generate in public mutual funds less than 5% annually (arguably less, much less) with high fees and how can you generate real wealth by investing in these funds?

 I can't say that I understand this question. The rate of return on mutual funds is highly dependent on which funds you are investing. I invest in passive index based mutual funds. They are very low fee and readily available to even the smallest of investors. The annual rate of return of is much higher than 5% if you look at the long term (10+ year). The only way to generate real wealth is over the long term. There is no quick and easy money.

3. Why do SEC regulations that "protect" the middle class also prevent them and allow only "accredited investors" (aka rich people) the ability to invest in private investment opportunities?

The regulations are what they are, and we must work within the constraints of the law. It really isn't a big deal. A huge number of investment opportunities are still available to even the smallest of investors. Especially with some of the new crowdfunding opportunities.

U. S. tax policy and securities regulation make it very difficult for the middle class to save and grow wealth. These policies help the rich get richer and the poor stay poor.

All I hear are excuses. No one ever said that it was going to be "easy" to save and grow wealth. If it was easy, everyone would be wealthy.