One of the key problems with investments is often touted as one of it's key advantages, the simplicity of the action. For those of you that trade stocks, you will know how easy it is to execute a buy order, pick a stock, select the quantity and click "buy". Boom, you are the proud owner of a small portion of that company. Even in other investments, like buying a property, agents typically go out of their way to make the process as easy as it is for you to invest. Agents will spend the time to slowly explain the option-to-purchase, lawyers will handle all the other nitty gritty. I believe this is one of the key reasons why most investors do not do well, let me explain...
Imagine for a moment, you are due to make a key presentation to the rest of your company including your bosses. You know your career will definitely be affected by this presentation and so you take many days/weeks to prepare, drawing from all your lessons learnt in school and your entire career's experience to try your best to make the best presentation possible. Our minds correlate difficulty of execution and expected impact with the required amount of preparation. Unfortunately, our minds do not correlate expected reward with the required amount of preparation.
Now, compare that with how we approach investments. Each trade is like one of those presentations, it will affect how much money you are going to make in the future. But because of the ease of executing investments, many of us are not prepared to put in the preparation effort. Instead of having 4 years of formal schooling in a subject, and multiple years of experience executing trades, many people bet their hard earned money on investments they do not understand.
Investing, as with any skill in life, will improve with education, practice and experience. Make no mistake, even though investing is easy, investing successfully is one of the most difficult things to do. The proof is in the pudding, most investors lose money over time. So if you want to succeed in investing and building an alternative income to retire on, you need to put in the effort to learn and gain experience, arguably more effort then you put into learning what you do for your current job. Even then, you are not guaranteed to succeed, but you will have a much better chance then the unprepared.
A different perspective
Another way to look at this is my philosophy that you get paid for what you have already done. Remember your first job? Why did the firm hire you? Because of all the work you have done and the results you have shown since you started school until you graduated. And your pay was likely based on what type of degree you have. The raise you receive for the following year is based on what you did in the year before. If you performed poorly, you will get a small raise or no raise, even though you might go on to do spectacularly the next year. You would only be rewarded for that work the year after that.
Investing is the same thing, the work you put in today to learn and practice investing will only be rewarded much later. Worse still, the feedback loop on investments is much longer and can be confusing. Many investments take years to mature and you will only learn the lessons from any failures many years later. For some investments, even if you do everything wrongly, you will still make money and even if you do everything right, you will still lose money. So at times, it is very difficult for individual investors to hone their craft, because the feedback mechanism is so convoluted. In summary, don't expect an easy learning journey. Be prepared for a long drawn out learning curve. I personally took almost 10 years of practice and part time learning before I was consistently profitable.
I have opined on a whole bunch of problems, what do I think is the best way forward? I still think learning investing for yourself is the best solution. It is the most rewarding option and keeps you in full control, albeit requiring the most effort on your part. Your results will only improve with time as you put more effort and gain more experience. However, I also understand that approach is not for everyone, as some may not have the time or motivation to learn. That does not mean you should miss out on the rewards of investing successfully, but you might have to take a different approach.
So, in order of preference: