The reality of the stock market is that individual investors get raped. I know "get raped" is a term that gets thrown around a lot even for minor screw-overs, but I really do mean it in the full sense of the term in this case. Unless you do stock broking as your career, you are going to get absolutely **** on by everyone else. Look at what the banks did with the subprime loan market. They told ordinary investors who trusted the advice of professionals that the portfolios were golden, when in reality they were deliberately engineered to fail. Or look at CNBC and John Cramer's track record of screwing over anyone dumb enough to take their advice. Keep in mind too that unless you're already in a financial position where you can throw around tens of thousands of shares at a whim and absorb heavy losses (which WILL happen btw), you cannot make any serious cash in the stock market. Doing what most people do where they just invest in several hundred shares of a few companies can only, at best, net you several thousand dollars in profit (maybe in the lower 5 figures if you're lucky). Meanwhile you could lose just as much, if not much more, and the losses will probably hurt you much more than the profits will help you. The stories you hear of people getting rich from small investments in the stock market are about as common as people getting rich from winning the lottery, and the two really are comparable. Mutual funds are probably your only realistic bet as a middle class member, and even then keep in mind that your returns are going to be pathetic. And as much as mutual funds are portrayed as "safe bets", keep in mind that they too have been known to fail, if not deliberately engineered to fail in some cases. Like I've been saying this whole time, you really are trying to swim with sharks here.gameguy6700
What you describe is people doing something best known as "speculation", not investing. Investing is not taking professional advice as being golden, and certainly not investing in complex derivatives like mbs's. Anyone who takes their time to understand exactly what they are getting into can realize good returns (and many have, at least a lot more than you imply). Will it necessarily make you rich? No, and most definitely not in the short run. Is it risk-free? Not at all, the closest thing to risk-free in this world would be bonds/bills from stable and solvent governments (which pay pathetic returns). You can lose all of your invested money, but you can also do quite well. Is investing stacked in favor of those who already have money? Most certainly. Anyone that already has power/money can use it to gain more power/money. I concede that you might need sizable capital to make any material amounts of money. But if you're that lacking in cash, you should save up your money first (which I realize might not be the most viable activity at this time). $1,000 for instance will not make you a lot, unless you get in on the ground floor of some really big start-up (but that's another story).
However, all of that said, one can still do well in the market over the long term, and apart from mutual funds. Stock market sharks are only scary if you pay attention to the noise and short term fluctuations they make, or if you invest blindly and in things you don't understand (i.e. derivatives or companies with complex business models that involve them). Investing is not to be treated like playing the lottery or gambling. That by definition is speculation. You must take it for what stock is: ownership in a company. Or in this case, ownership in companies with strong fundamentals and/or growth potential (and maybe with aligned technicals if you really want to time yourself well).
Finally, how can stock market losses hurt "much more" than any gains if you practice proper risk management, are reasonably diversified, and do not invest anything that you cannot afford to lose? You can only lose what you invest (unless you're short or leveraged), and even then you will not lose your entire principal unless the company goes bankrupt (in which case the company probably wasn't a good idea from the get-go). You may not see it, but there's a method to the madness.
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