Investing principle 1: Have faith in capitalism and confidence in the markets
Capitalism is an adaptive, robust economic system that has delivered incredible developments to the benefit of mankind.
For example, the wealth creation of capitalism has meant that over 1,000,000,000 (one billion) people are no longer trapped in crushing poverty and child mortality rates have fallen by over 50%, all within a generation . Despite the apparent doom and gloom, the world’s economy continues to grow, year-on-year, creating wealth and return opportunities for investors. Hit the play button in the figure below from GapMinder to see the effect capitalism has had on increasing wealth and improving health in nations across the world over the past 200 years.
Accepting that capitalism is a powerful wealth creation mechanism, as investors we want to look for ways in which we can take part in this growth in an effective manner. Capital markets are a good place to look to access this. Stock and bond markets provide investors with a robust and liquid way in which to allocate capital to businesses and governments in return for their share of growth.
As investors, we need to keep faith in capitalism as a robust and resilient economic system and recognise that the markets are an efficient mechanism for rewarding those who provide capital to those engaged in the pursuit of wealth creation. The future looks bright from where we are sitting.