We are investing in Capitalism, and that belief is the primary reason to invest when the market is going up and when the market is going down.
Years ago when I first started investing other people’s money in the stock market, I spent a lot of time talking to myself about why I was doing it. My first client had investments in many different endeavors including stocks, debt, precious metals, residential real estate, commercial real estate, and collectibles. I was so fortunate to learn about each of these through his exposure to each one. Frankly, because I couldn’t touch it or hold in my hands the stock market was the most mysterious to me. Here is what I thought the stock market was about originally; you sent money someplace and it was used to buy something that someone said on any given day had a value equal to something. From what I could tell the most important part of the equation was you had to buy the Wall Street Journal every day to find out what they (whoever they were) thought the price was for the thing you bought. Compared to more tangible investments like real estate, the stock market was a very puzzling endeavor.
The primary conviction and belief that I finally came to during the years I was studying and experiencing the stock market is simple: I believe it is a good thing to invest in whatever and wherever my neighbors were getting up to go every morning. On most every morning in every neighborhood I have lived in, people get up and go to work in order to feed their families. A significant number of them go every day to work at companies. Capitalism is the system where the country's trade, industry, and profits are controlled by companies. I decided the stock market was the best place and the most direct connection to investing in the probability that tomorrow people will get up and go to work. Or to use a nobler thought, it was investing in Capitalism.
The second reason for investing in the stock market that I embraced is that the companies we can invest in own lots of great things. I like real estate as an investment, but I could never own as many pieces of valuable real estate as the Disney Company owns. I love planes, but I will never be able to own as many cool airplanes as Boeing owns. One day years ago, it dawned on me that if a person owned a part of the company, they owned what the company owned, and that would be something impossible to accomplish otherwise.
I am not a historian; however, it is awfully clear to me that for a very long time people have gone to work and people have wanted to own great things. I am also not a prophet, but I believe these will continue. Ownership of company stocks via investments in the stock market is an excellent way to participate in these beliefs. By the way, the value of what stocks are worth is really just a lot of math to calculate what the workers are producing and how many great things the company owns.
P.S. Here are a few statistics to help you remember that companies do amazing things. The company 3M was started in 1902 (that’s a depression and two world wars ago). Boeing sells a jet for $100 million dollars and the projection is that the US needs 3100 more over the next 20 years. Accenture Systems process half the world’s emails. Visa has 1 billion credit cards in circulation worldwide. Lockheed is working on a plane that will go coast to coast in 90 minutes. Starbucks sells 8 million cups of coffee a day. JP Morgan Bank was started 219 years ago (43 Presidents ago). Johnson and Johnson started producing gauze in 1887. Apple has sold 700 million iPhones.
- 3m was started in 1902: http://fortune.com/2017/03/06/apple-iphone-use-worldwide/, https://multimedia.3m.com/mws/media/1576821O/facts-and-figures-2017.pdf
- Boeing - Over the next 20 years the US needs 3180 more jet airplanes at an average cost of $100 each: https://www.statista.com/topics/3697/airbus-and-boeing/
- Accenture - It is the Accenture system that is used for processing about half the world's emails:
- Visa - There are over 1 billion Visa credit cards in circulation worldwide:
- Lockeed Martin - They are currently working on a commercial airplane that could cross the country in about 90 minutes versus the current 5 -6 hour flight time:
- Starbucks - Starbucks sells on average 8,070,428 cups of coffee a day: