Why America's Top Earners Keep Losing Money in the Markets: A Data-Driven Reality Check

The Paradox Nobody Talks About

Here’s a counterintuitive truth that shakes conventional wisdom: making six or seven figures doesn’t automatically translate to investment success. In fact, research suggests the opposite is happening across the US market. While the S&P 500 has consistently delivered approximately 10% annual returns over three decades, the typical American investor barely managed 5.5%—a gap that becomes even more dramatic when you look at high-income earners alone.

A DALBAR study revealed something startling: those earning substantial incomes actually underperformed the market average by 6%. So what’s going on? Why do people with access to better resources, premium financial advisors, and sophisticated tools end up with worse outcomes?

When Intelligence Becomes a Liability

Success in business often requires solving complex problems. Doctors, lawyers, engineers, and executives are used to navigating intricate systems and making sophisticated decisions. Unfortunately, this expertise rarely transfers to portfolio management.

Investors with advanced degrees—MBAs, PhDs, medical degrees—tend to construct unnecessarily complicated portfolios. Research from CNBC shows a striking pattern: “dead” investors (those practicing strict buy-and-hold strategies) consistently outperform active traders. The higher your income bracket, the more frequently you’re likely to tinker with your holdings.

This constant adjustment creates friction. Every trade generates taxes, fees, and opportunities for emotional decision-making. Meanwhile, the investor who simply bought and held watches their wealth compound.

The Advisor Trap and Fee Erosion

A well-earned paycheck comes with perks: you delegate your taxes to a CPA, your car maintenance to a mechanic, your landscaping to professionals. So naturally, wealthy Americans hire financial advisors to manage their money.

But here’s where it gets expensive—not just in dollar terms, but in performance. According to 2024 S&P research cited by Apollo Academy, approximately 90% of active public equity fund managers fail to beat their benchmark index over a 10-year horizon. Fixed income managers fare slightly better but still underperform: about 81% of them don’t match their index returns.

What you’re really paying for is underperformance dressed up as expertise.

The Psychological Trap: A Safety Net Becomes Recklessness

Higher income creates a financial cushion that lower-income earners simply cannot access. This cushion is objectively useful—until it isn’t. When you know your next paycheck can absorb a loss, the stakes feel lower. Investment mistakes feel forgivable.

Tae Kim, financial educator and creator of the “Financial Tortoise” series, describes this dynamic perfectly: “This cushion can create a casino mentality. You don’t take your losses as seriously because your next paycheck erases them.” The result? Risk tolerance becomes risk recklessness.

Activity Bias: Mistaking Motion for Progress

In demanding careers, productivity directly correlates with action. Close deals, manage teams, solve problems faster—these activities determine success. High achievers develop an almost reflexive equation: more activity equals more results.

Investing operates under completely different physics.

Research on investor behavior shows that disciplined investors who manage emotions and stick to long-term strategies outperform those who constantly adjust their positions. Yet high earners struggle with inactivity. They trade too often, rebalance too aggressively, and chase opportunities that don’t exist.

As Nobel laureate economist Paul Samuelson once said: “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take your money to Las Vegas.” The message is clear—excitement and returns are inversely correlated.

FOMO and Hot Trends

Crypto surges. SPACs explode onto the scene. Meme stocks capture headlines. Social media amplifies stories of 10x returns and overnight wealth. For people accustomed to having premium access to information and opportunities, missing out feels unacceptable.

But social comparison—especially among high earners in competitive circles—drives risk-taking that destroys wealth. These “opportunities” rarely have substance behind them. They’re driven by fear of missing out (FOMO), not fundamental analysis.

The Path Forward

Making substantial income is genuinely an achievement. It provides optionality and security most people never experience. But wealth creation requires a second skill set entirely: the ability to stay boring, patient, and disciplined while surrounded by noise and “opportunities.”

The US market will reward those who treat investing less like a game of skill and more like time and compound growth working in their favor.