Understanding how capitalism works

Understanding the reality of capitalism will enable you to develop asset management strategies.

Capitalism can be summarized as follows:

• Workers use their bodies to make money.
• Entrepreneurs use people to make money.
• Investors use money to make money.

In other words, to be freed from being a worker, you have two options: become an entrepreneur or an investor.

If you have ideas to improve society or the enthusiasm to motivate others, you might become an entrepreneur.

One of the reasons I started this blog is to improve society. My knowledge and experience might help someone.

However, I don’t have the enthusiasm to establish a company and hire people.

Thus, I concluded that I couldn’t become an entrepreneur.

Becoming an investor doesn’t require ideas. You can start with as little as $100. In other words, you can start immediately.

However, it requires time and patience.

The annual average return of the S&P 500 over the past 30 years is +7.89%.

If you invested $10,000, you would make a profit (money) of $789.

If you invested $100,000, you would make a profit of $7,890.

If you invested $1,000,000, you would make a profit of $78,900.

Those who are used to saving and managing their household finances might be able to invest $10,000 in cash right away.

However, the profit is $789.

Better than nothing, but it’s not enough to support your livelihood.

I imagine that people who have enough cash to invest $100,000 are rare.

Even if you had $100,000, the mental hurdle of investing it all in stocks at once would be high.

You need to start with $10,000 and gradually get used to investing.

Sometimes you will experience crashes.

Experiencing crashes will make you hesitate to invest more.

Because there is a possibility of unrealized losses.

Nevertheless, I have always been good at gradually building up my efforts since childhood, so I chose the path of becoming an investor.

I anticipate that it will take another five years to cover all living expenses through investments. However, I interpret it as only five more years, and the goal is within reach.

This is an important point of the article, so I will write it again.

Capitalism can be summarized as follows:

• Workers use their bodies to make money.
• Entrepreneurs use people to make money.
• Investors use money to make money.