The average investor wants to emulate the success of these people. This creates unreasonable expectations and what I call 'stupid greed.' We need 'smart greed!'
Take a look at any legendary investor's story. Be careful to read between the lines. All of them, at least the ones I am familiar with, have some edge or other that the average investor lacks. None of them got lucky, and all of them worked very hard for their success. Often times whatever edge they had is not available to the average person. For example some of Carnegie's methods of success would be illegal today. Other investors such as Lynch are their generation's geniuses, who were able to see opportunities missed by their peers and achieved success far above the average investor.
As average investors we likely do not have an edge that makes us better than everyone else. We can't expect to play chess like Fischer or box like Pep.
While we can not be the next Graham, we can avoid making stupid investment decisions. Achieving average returns is far better than holding the bag the next time the bubble bursts.
Stupid greed can presently be seen in the crypto currency markets. Latecomers want to see the extraordinary returns enjoyed by early adopters, those few nerds that turned $100 or some spare processing power in to hundreds of millions. As such many are pouring money into dubious alt coins hoping to get rich. They are not performing due diligence because if they were, most alt coins would be worthless (there are lots of good alts, but a multitude of bad ones).
I told a friend to buy bitcoin at $1000, $3000, and $7000. Each time this person was adamant that such a price was far too much to pay for one. And yet today, only a month or two after the 7k suggestion, bitcoin is trading at $16,000. This person didn't want to double their money, they wanted to win the lottery. They told me to notify them when I found an alt coin that was going to ascend to the heavens. I am not very good at picking alts, but each time I suggested bitcoin I predicted a price increase. Instead of easy money this person got nothing.
No one would expect to buy amazon stock today and see the returns that late 90's investors earned. From about $2 a share to over 1k, these are gains that early bitcoin enthusiasts are currently realizing. But hardly anyone gets these kinds of returns because it is hard to identify these kinds of opportunities.
It is easy to become excited about an investment. It is extremely difficult to correctly identify the best opportunities. My most recent mistake was losing money on bitcoin mining contracts. I did not consider all of the variables and ended up losing about 50% of my investment when network difficulty increased much faster than I had anticipated. I hope to write more about this experience in the future because it was an excellent, and expensive, learning experience.
Smart greed means finding a smart edge. We don't need to beat everyone else's returns or get rich in a few weeks. For example simply following Lynch's suggestion of regular contributions to an index fund is really easy to follow and will vastly increase wealth long term. This is a strategy based on solid evidence: even if one started contributing at market peaks, one would be far better off over a period of 10 years compared to holding cash. We don't need to stress about political events or market crashes using this strategy. Simply set regular contributions, go about our lives, and check back in a decade or two. Easy!
We don't need to be geniuses. We just need to be smart and have reasonable expectations. If an investment seems like a good idea, it needs to be provable. Had I done more thorough calculations for my mining investment I would have quickly seen that a small deviation would result in a loss. I got excited about making money, and I got stupid. Sagan famously said that extraordinary claims require extraordinary proof. By the same token, the more one wants to earn from investments, the more one must work to prove that any given opportunity is exceptional.
