Three Truths Behind ‘Extraordinary Returns’—Usually It Is the Third

Originally published 2021-08-27Reprint with four reminders from Robin

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Collected in Robin Shen’s Field Notes · Content type and attribution are shown above

English translation of the Chinese post originally published 2021-08-27. Translated 2026-10-27 with AI assistance. Historical figures and claims have not been updated or independently verified. 中文原文

Reading guide

When someone promises extraordinary returns, one of three things is usually true: the investment is extremely risky; the person has genuinely found an overlooked opportunity and kindly wants to share it; or the person is lying. Often it is the third. Economists argue that most people earn only average market returns, making long-term holdings in broad-market index funds a rational approach. Charles Wheelan says he cannot know tomorrow’s or next year’s Dow close but is almost certain it will be substantially higher in 25 years. Robin’s reminders: distrust stock tips, develop independent judgment, and take the long view. If you can identify the richest deposits of investment gold, invest patiently; otherwise, stick to indexing rather than expecting a windfall.

Key points

Extraordinary-return promises have three possible explanations; often the explanation is a lie.
Wheelan says the index is almost certain to be substantially higher in 25 years.
Robin: distrust stock tips, think independently, and take the long view.
If you cannot identify the richest gold deposits, stick to index investing.

Trees at different stages of growth with connected roots on cream paper, suggesting patient cultivation and lasting value. — Venture capital & investmentThematic illustration · AI generated

Full text — English translation

In financial markets, when someone promises you ‘extraordinary returns,’ the truth is usually one of three things: First, the investment is extremely risky. Second, this person has genuinely discovered an opportunity other skilled investors missed and is kind enough to share it with you. Third, this person is lying. Very often, the truth is the third. Economists see most people as able to earn only average capital-market returns. A rational route to building wealth is therefore to buy broad-market index funds and hold them for the long term. Essentially, you earn the market’s average return. Economist Charles Wheelan says: ‘Where will the Dow Jones close tomorrow? I do not know. Next year? I do not know. In five years? Probably higher than today, but I am not very certain. In 25 years? I am almost certain it will be substantially higher than today.’ Growing wealth therefore requires a long-term outlook, including in capital markets. Any wealth strategy must follow basic economic principles. The tantalizing promise of ‘getting rich overnight’ is, through an economic lens, merely an illogical outlier. ---- Robin: 1. Do not believe someone will give you a winning stock tip and that following it will make you rich. 2. Develop the ability to think and judge independently. 3. Take the long view and make time your friend. 4. Investing is also like panning for gold. Some places have rich deposits; others do not. If, through point 2, you can identify the richest deposits early, invest according to point 3. Otherwise, stop expecting a windfall and stick to index investing.

These articles are personal notes, book excerpts, and collected reprints. Figures and events reflect the time of the original publication, are not current information, and do not constitute investment advice.

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