Why Equities Just Might not be the Same Anymore

While for decades, the historically high returns of the stock market have been used to justify putting more money into the stock market, some underlying factors have changed that make this constant growth story no longer as sure of a narrative. While total returns have been buoyed by several massive companies that manage to keep growing, there are not as many avenues to growth as there once were for retail investors. Investing in stocks may still have high returns over the next few decades, but the repeated rhetoric that it will always be so is based on assumptions that may no longer hold true. Retail investors are contending with more and more high growth opportunities that are closed off to them. The returns of those with a large amount of assets and those with less assets are diverging at a rapid pace as a result of the ability of the wealthy to access and create exclusive markets which avoid the high burden of regulatory requirements in private markets. Until uniform reporting requirements are established or the barrier to entry is reduced to the public market, everyday investors will lose out on much potential growth they would have had access to in the past. 

Less companies are listed in public markets than were in the past. In a world where investors seek diversification, fewer companies in the pool is almost always a bad thing. A smaller selection of equities means that a smaller range of risk appetites can be met. Of course, many retail investors got burned through access to volatile companies in the past, but that was a risk they bore willingly in the name of high returns. The fact that less companies are listed means that the stock market is a less accurate representation of America’s economy. Higher percentages of sectors are only privately available than before, meaning any investor seeking diversification in industry will be a victim of whatever subset of those companies choose to participate in the public market. However, the reality is far more damaging to normal investorsg, as the companies with the highest probability of high growth disproportionately seek funding from the private sector.…