Tag Archives: adviser

Capitalism 101

When you talk about educating investors, Matson Money believes that Wall Street does a terrible job of it. They teach people how to buy stocks, how to do this, do that, but nobody really talks about what’s underlying all this: Why would you even want to invest?

So I’ve created a little talk that I call Capitalism 101, which I could paraphrase by saying, “how is wealth created?” And I’m talking about true wealth, like the wealth, GNP of a country. Not “moving this guys’ money from his pocket to your pocket.” You might get rich but that didn’t create any wealth. So when you really stop and think about it, you ask, “Well, what is really needed in a country’s economy to make that economy grow and create this wealth?”

And the one that comes to mind first is skilled labor. We take countries like a lot of the Asian countries, but China is a great example over the last 20 years. A lot of skilled labor, allowing them to produce a lot of product quickly. Next, you’re going to need every economy needs, raw materials. That’s why China needs those raw materials from Australia and vice versa. Canada, Australia, Chile, Norway, these countries generate a lot of wealth just by having natural resources and selling those resources to the latter.

The third thing that’s needed is money, financial capital. And where and who is supplying financial capital to this whole system. It’s investors. So by supplying this capital to the whole system and the wealth being created, you as an investor, are entitled to your share of that increase in wealth. Now, unfortunately most investors don’t get what is truly their fair share. And that’s a big part of what my message has been over the years is, “how do you go about getting that?”

Advisers have a huge role to play because of their job. They’re not there to create wealth. And we know they’re not there to pick stocks, you know, or time markets or do those traditional things we call active management – none of that is creating wealth anyway. The adviser’s role is to make sure the investors, who are supplying the financial capital, are getting their fair share. So I call it a defensive strategy. The economy creates the wealth, the adviser structures the investment solution that enables the investor to get a fair share and then brings discipline to the whole process.