Why I Invest

I just wrote a A Simple Guide to Financial Freedom based on my experiences with Financial Freedom. Consider giving it a read if you are interested in this topic.

My investment philosophy can be boiled down to this:

I believe that, on average, the world will be a better place tomorrow than it is today.

It’s sometimes hard to stay with this when it feels like the world is tearing itself apart. And there will for sure be periods of decline.

But big picture, the world tends to improve over time.

So I put my money to use, expecting this better world to pay me back in the future.

I would like to say that spending $1 in the future will give me more than spending $1 today. But because of inflation that is not true. This doesn’t invalidate my thesis — it’s just that dollars are a bad investment long term.

If I put my money in something else — stocks, property, etc., — I will be able to get more per unit in the future than I will today.

Here is a chart demonstrating this behavior: the Consumer Price Index priced in S&P500:

As you can see, in “units of S&P500” things tracked by the CPI are cheaper over time.

Should we expect this to continue?

Nobody can predict the future. But the trend is clear.

There is also sound logic behind the argument that things will continue to improve: we humans have always strived to improve our conditions. We are extremely creative and inventive as a species. Why should that suddenly stop?

As we continue to invent and develop new technology, we will continue to improve our productivity. We’ll continue to develop new products that can’t even be bought today. And if you put some money into this you’ll reap some of the rewards as well.