I think rich get richer because of a bunch of reasons but not really because of “buying when there is blood on the streets” or “timing the market” if you prefer.
Reasons include:
* Children inherit wealth and knowledge of how to build wealth
* The children are doing this rather than trying to leetcode to get their first job (or rack up debt to get qualified for it etc.)
* Connections
* Compounding (despite corrections)
* Political influcence
* Can afford to hire tax/law people to avoid tax
* Tax law favours the rich. You pay no tax on a billion in capital gains if you never sell and if that yields you 50m you pay tax on that but let’s say it is half so 25m that is 2.5% of the wealth but if it goes up 75m over the same period that is tax free so you paid 20% tax on the increase in net worth. Compare that to a worker. And this is without doing any tax avoidance!
* To avoid tax at all in the previous example get the corp to buy back shares instead of paying dividends then live off borrowed money.
> * Children inherit wealth and knowledge of how to build wealth
that knowledge is so important. When i was a kid all I was told over and over was "get a good job in an office so you don't have to work like i do". This was coming from blue collar oil and ranch hands in West Texas so that's what i did and it's worked out pretty well for me. However, I'm teaching my kids how to build wealth and that a well-paying job is an income stream to assist with that but not the whole answer.
Reasons include:
* Children inherit wealth and knowledge of how to build wealth
* The children are doing this rather than trying to leetcode to get their first job (or rack up debt to get qualified for it etc.)
* Connections
* Compounding (despite corrections)
* Political influcence
* Can afford to hire tax/law people to avoid tax
* Tax law favours the rich. You pay no tax on a billion in capital gains if you never sell and if that yields you 50m you pay tax on that but let’s say it is half so 25m that is 2.5% of the wealth but if it goes up 75m over the same period that is tax free so you paid 20% tax on the increase in net worth. Compare that to a worker. And this is without doing any tax avoidance!
* To avoid tax at all in the previous example get the corp to buy back shares instead of paying dividends then live off borrowed money.