Why would you go there…?

I want to emphasize the importance of capitalism and free markets in the context of investing. Regardless of your stance on these ideas, it’s crucial to understand their role in underpinning the concept of investing in the stock market.

If you disagree with these concepts, I encourage you to consider focusing on the investment aspect rather than engaging in debates about economic or political systems.

Capitalism and free markets are fundamental to many investment philosophies and guiding beliefs. The stock exchange, in particular, is a prime avenue for wealth generation, as it entails investing in operating businesses.

To be a successful investor, it’s important to grasp the central role of capitalism. Investing aims to underwrite an enterprise believed to grow and deliver profits. If you reject the principles of capitalism, investing in public markets may seem incongruous.

“Capitalism provides the framework for amplifying innovation in the face of adversity”. (I said that)

This discussion doesn’t aim to judge whether capitalism is good or bad. Every facet of life has both positive and negative aspects. My purpose is simply to reaffirm that my investment philosophy is anchored in free markets and capitalism.

What is Capitalism?

Capitalism is an economic system grounded in private enterprise, where trade and industry are controlled by private owners for profit. It drives innovation, which fuels wealth creation and overall prosperity. The principles that underpin free market capitalism have aided in creating the most moral organisation of the economy, giving humanity the chance at prosperity and liberty.

Under capitalism, market forces are controlled and owned by individuals and companies, whether they are big corporations or local businesses. Both own the capital goods to their business, set the prices, and operate for self-interest, i.e. profit. Free Market capitalism is what I support, as it means individuals and entrepreneurs are unrestrained.

We are free to invest our capital where we want to, decide what products and services to produce, and set the price we want from the market. At the centre of capitalism lies private property rights as opposed to government-owned assets.

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It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

Adam Smith

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Capitalism and free markets are about removing the barriers surrounding transactions and the production of products and services. Capitalism is about decentralisation more than anything else.

The Stock Market and Capitalism.

The stock market is the central institution of capitalism. A company raises capital through the public markets to grow and implement its business plan. From an investor’s perspective, the stock exchange represents the purest form of capitalism.

No one forces us to invest in companies or specific asset classes. It is a matter of personal choice. This involves the voluntary exchange of shares, the freedom to compete, buy, hold, and sell, and the protection of our holdings through the exchanges themselves. It is a public and free marketplace, which is the very essence of capitalism.

The businesses in which you invest also put these principles into practice through competitive bidding for goods and services, the freedom to set prices, the ownership of property rights within the business, and the freedom to grow and expand as one sees fit. All public companies exist to make a profit. Companies also generate jobs, create solutions for humanity, contribute to the growth of economies and support entire value and supply chains that flow down to small family-run businesses.

As shareholders, we are participants in this capitalist marketplace and ultimately benefit from the success of the companies we hold and the overall growth of the economy.

Why do I believe in Capitalism?

My investing philosophy remains grounded in the key pillars of capitalism and economic freedom. These include private property, profit as an incentive (self-interest), supply and demand (market competition), freedom of choice, consumer sovereignty, and limited government intervention. I acknowledge that some level of government intervention through laws and regulations is beneficial to capitalism and needed for society.

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Capitalism is not an economic system, but a human system, based on freedom, choice, and voluntary exchanges.

Brian Tracy

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Although free markets and capitalism are often seen as separate concepts, they are interconnected and reliant on each other. Free enterprise involves removing barriers to the exchange of goods and services and the transfer of wealth. Capitalism, on the other hand, is about the creation of wealth and profit from the production of goods and services. I view them as intertwined.

I participate in capitalism because I have faith in humanity’s ability to tackle complex problems, offer solutions to society, and drive overall economic growth. When individuals or businesses set out to address a problem and meet a need, I believe that those who support these endeavours, such as shareholders, should be rewarded as a result of their success.

“Capitalism demands the best of every man. His rationality – and rewards him accordingly. It leaves every man free to choose the work he likes, to specialise in it, to trade his product for the products of others, and to go as far on the road of achievement as his ability and ambition will carry him.” Ayn Rand.

This idea has been a driving force in my own life since 15 years old. I want to contribute to the advancement of capitalism and its positive impact on the world as both an investor and an entrepreneur. This belief forms the foundation of all my investment decisions.

In Summary…

While this is not a comprehensive analysis of capitalism, it is a brief summary of my perspective on capitalism and why I participate. Being a capitalist has enabled me to establish companies that provide employment, support numerous small businesses, and offer solutions through my products and services, for which I have been rewarded with profit and wealth.

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Capitalism is the only system that can make freedom, individuality, and the pursuit of values possible in practice.

Ayn Rand

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None of this would have been possible without capitalism and the freedom to choose how I spend my time, how hard I work, and where I invest my capital and efforts. I am a strong supporter of capitalism due to its positive impact on my life. I value freedom, the incentive of profit when taking calculated risks, and the protection of assets and choices.

Capitalism and free markets do work. The benefits far outweigh the drawbacks. I hope that with my resources, I can continue to influence capitalism for the better.

How does this relate to investing? It is directly related. The more I focused on being a full-time private investor, the more my belief in this concept strengthened. As an investor, I am free to allocate my capital to businesses that are making a positive impact, creating valuable products and services for society, providing jobs, supporting other businesses, and contributing to economic growth.

Consequently, I seek to share in their profits, so I can reinvest in enterprises that create numerous positive outcomes for all stakeholders. If a business is not adding value to society and its stakeholders, why invest in it? Simply choose not to invest.

🖼️ What is the cover image? The illustration is a representation of Capitalism and Free Markets with the trade of rugs on the Silk Road.