Because we’re not playing the lottery. We DON’T engage in shuffling assets from one trader to another. That’s risky, as it’s essentially a BATTLE for someone else’s piece. Instead, we’re NURTURING the piece we already have. Feel the difference?
TRADING = FIGHTING for someone else’s piece. Everyone wants to take from each other. INVESTING = GROWTH of your own piece. You’re not taking, you’re gaining.
WE’RE NOT FIGHTING WITH OTHERS. WE’RE NATURALLY GROWING! But doesn’t inflation hinder gradual growth? It’s not quite how most people think. Yes, inflation does indeed hinder money preservation. Remember:
RUSSIAN INFLATION = 5% US INFLATION = 2% • INFLATION – YOUR FRIEND!
However, the presence of inflation isn’t just BAD (currency devaluation), it’s also GOOD (economic growth). Such an economic system allows both money loss (if left idle) and money multiplication (when invested in economic growth).
If you bought shares in reliable enterprises for the long term (several years), their average increase is due to inflation. In a way, with such a purchase, you’re “freezing” the effect of inflation. A financial instrument (stock, bond) is a part of the material property complex. It’s something that doesn’t devalue or devalues slowly, unlike traditional currency.
By the way, if you hear friends complaining about high inflation in Russia, remind them that DUE TO INFLATION, the growth of the Russian economy is FASTER than in the US, where inflation is lower. These are two sides of the same coin. In the US, low inflation (2%) means the average stock market growth is about 8% per year. In Russia, with higher inflation (5%+), the average stock market growth is 20% per year. That’s why I advise you to stop seeing inflation as an enemy. If you do everything right, it’s your friend. • ECONOMIC GROWTH – YOUR FRIEND!
Around me, there are so many people who perpetually complain in the style of “life was better before,” “the Soviet Union was better than now,” “it’s good where we’re not,” and so on.
These people fail to notice that stores are full of delicacies that didn’t exist 30 years ago. They don’t notice the absence of shortages, the ability to freely buy housing, cars, clothes. They don’t notice the access to the global network and the opportunity to travel.
These individuals tend to idealize the Middle Ages (clean air and knights with princesses), forgetting that people then lived to be 30-40 years old, bathed twice in their lives (at weddings and funerals), and the menu all year round consisted of potatoes and turnips…
We live much cooler, better, more comfortable and richer than ours.
Today, more lives are lost to excess weight than to hunger. A situation unimaginable a century ago. This has become possible due to ECONOMIC GROWTH following technological advancements. In just the past century, the average increase in prosperity has been about 3000%. Think about it! We are living 30 times more affluent lives than our great-grandparents and grandparents.
One hundred years ago, Henry Ford launched mass automobile production in the US. Prior to that, people traveled on horses, and New York was filled with two-meter piles of horse manure, with no idea how to deal with it. This isn’t the Middle Ages. This was a century ago!
Now, imagine you bought Ford shares a century ago. Or shares of any other company. Everything has grown by at least 3000% since then, thanks to technology and overall economic growth.
That’s why THE LONGER THE GAME, THE BETTER. Over extended periods, you will come out on top. Because you have on your side: INFLATION + GLOBAL ECONOMIC GROWTH
There’s another crucial aspect. THE INFLUX OF FRESH MONEY! Capitalists are interested in profits. So, they invest their money in enterprises that can yield profits (interest). The more money they invest, the more expensive they become (these enterprises, shares, bonds). This is something to leverage.
Imagine a COMPANY with a total value of 1000 USD, divided into 100 SHARES (at 10 USD each). Let’s say the company is growing, and new investors believe in its value appreciation. Therefore, they want to buy its shares. However, the holders don’t want to sell at 10 USD each because they also believe in price growth.
Some holders are willing to sell for 15 USD, some for 20 USD, and some only for 40 USD. Gradually, old holders sell shares to new investors at the higher price. The COMPANY’S PRICE RISES, because the average share price is no longer 10 USD, but perhaps 30 USD. In this case, the company’s market capitalization is now 3000 USD, not 1000 USD.
This is an example of how THE INFLUX OF FRESH MONEY leads to economic growth. Investors love two things: • SAFETY • PROFITABILITY
Traditional markets like the US and Europe can’t boast high profitability because they have matured.
Emerging markets (Russia, Africa, Asia) can offer higher profitability. For instance, in Russia, the average growth is 20%, not 8% like in the US.
However, there’s a matter of SAFETY. Investing here is uncomfortable due to the criminal structure of society. An investor’s assets and investments can be taken (raided) in violation of all laws. In Russia, being honest and wealthy is dangerous. That’s a downside. But in Russia, you can earn handsomely from growth – that’s an upside.