 And welcome to the Communist Manifesto for Personal Finance, the only program that teaches you how to seize your means of production. I'm Comrade Rourke. In our episode on retirement planning, we explained how you could achieve early retirement by contributing 50% or more of each paycheck to a retirement plan like a 401k. Or Roth IRA. We also said if you wanted to retire early, you needed a basic understanding of INVESTING In all of personal finance, no, scratch that, in the entire universe, no topic causes more confusion, frustration, and confusion than investing. I mean, look at all these terms used by the Wall Street Journal. If learning about investing has frustrated you in the past don't feel bad. Wall Street intentionally makes the topic seem as confusing as possible, so you'll give up and hire a stockbroker to invest slash imbezzle your money. Similar to how the medieval Catholic Church presented itself as the only conduit to God, Wall Street experts present themselves as the only ones who can communicate with the almighty stock market. But just like that famous German anti-Semite, Martin Luther, we at the CMPF are here to start a reformation. We're here to show that you, yes, even you, Hiroshima in Johnson City, Tennessee, can learn the fundamentals of investing. So what is INVESTING? Investing is putting your money into assets that grow in value over time. Imagine you're a Ukrainian peasant who's paid in potatoes. Now, there are three things you can do with your potatoes. One, you can immediately eat all of them. Of course, if you do this, you'll find yourself caught in an endless cycle of exchanging your labor for income. Two, you can save your potatoes for another day. But even if you do this, you'll still have to go and work for more potatoes, because the potatoes you save aren't growing in value. Three, what if, instead of eating all your potatoes or letting them sit around and do nothing, you decided to plant them? Eventually, hopefully, the potatoes you plant will grow into plants that produce more potatoes. So, instead of eating or saving your potatoes, you're INVESTING them into the ground so they grow in value. And if you take advantage of exponential growth, you can harvest the potatoes you plant and get even more potatoes. Then you can plant those potatoes and get more potatoes and plant those potatoes and get even more potatoes. In many ways, investing is like farming. And as any peasant will tell you, farming isn't for the faint of heart. Farmers face a cornucopia of risks that can ruin their crops. Soil erosion, drought, Soviet agriculture. Investing also carries its share of risk. There is no shortage of horror stories where investors put their money in the wrong asset and lost everything because of the FREE MARKET. Because there are so many investing horror stories, the average person might conclude investing is a suckers game. And if they try to invest, they'll lose all their money. And Wall Street doesn't help matters with its complicated jargon. So people avoid investing altogether and leave their money in the bank, believing they're being wise. But the truth is, if you don't invest in something, you're making a mistake, which could also cost you your savings, which leads us to Chapter 2 Why You Should Invest U.S. currency, beautiful, green, and decorated with the portraits of slave owners. From an early age, children learned to covet cash. Cash can buy a child so many things. Candy, trading cards, vodka. Some of my intelligent children even take the heart of the saying of famous slave owner Benjamin Franklin, A penny saved is a penny earned. It's easy to see the wisdom of saving money. If you leave your money in a bank, it will stay there, safe, federally insured, and unchanging. Except, money isn't unchanging. Money is constantly changing. Let's go back to our potato metaphor. We said one option you had was to just save your potatoes for a snowy day, like a Russian winter or fascist invasion. While saving your potatoes is better than eating them all at once, it's still not the best option. As any farmer will tell you, if you let produce sit around too long, it rots. Like potatoes, if you let your money sit in a bank too long, it also rots. What are we talking about? We're talking about inflation, baby. Inflation is the rising cost of goods and services over time and the decreasing purchasing power of money. For example, an item that cost $100 in 1991 would cost almost $200 in 2021. So over 30 years, the U.S. dollar lost 50% of its value. And so, Biden, even when Democrats aren't in charge, inflation is still a thing. On average, prices rise by 3% every year. Meanwhile, the average savings account grows by a whopping 0.01%. In other words, if you have $1,000 in the bank over a year, you'll earn a dime. Meanwhile, an item that costs $1,000 this year will cost $1,030 next year. So for every $1,000 you leave in the bank, you're $29.90 in the hole. The point is, if you want your money to be worth something when you retire, you need to invest it. Now there are many assets you can invest your money in. Gold, real estate, Pokemon cards. Most of these assets is an episode unto itself, so we're not going to try and catch them all. Buy them. Instead, we're going to focus on the asset most people think of when they think of investing. Stocks. Of course, investing in stocks is a frightening proposition. Many people do it wrong and lose their life savings. So to avoid that fate, we're going to teach you Chapter 3 How to Invest Greetings Bolshevik Bunny. Greetings, Comrade Rourke. Thank you for meeting me on such short notice. Well, I didn't have much choice. The secret police knocked on my door in the middle of the night and... That's terrific. The reason you're here is so I can explain how to invest in the stock market. A topic I'm sure you have many questions about. You know, I really don't have any interest in... I mean, yes. Yes, I do. Odliczno, what's your first question? What are stocks? Excellent question. When capitalist pigs want to make more money, they start selling ownership of their companies in the form of shares. When you buy a share of a corporation, you become an owner of a tiny portion of that company. Now, Bolshevik Bunny, where do you think you can buy these shares of corporations? Uh, the share market? What? No, the stock market, fool. Oh, so shares and stocks are the same thing. Yes. Haven't you been paying attention? Not really. Well, let's just move on and say yes. Stocks equal shares. As I was saying, if you want to buy a stock or share of a company, you buy it from the stock market. Imagine this roulette table is the stock market and you decide to buy some stock. Let's put our savings on 17. Bolshevik Bunny, you now own a share of corporation 17. Hopefully, if that company is well managed and somewhat lucky, your share of the company should grow in value. If 17 proves to be an extremely successful company, your shares can grow dramatically. Of course, while your shares are tied up in this stock, you can't really spend them. At some point, you will have to cash in or sell your stock, hopefully at a higher price than when you first bought it. Hence, the common advice. Buy low and sell high. Comrade Rourke, I gotta be honest. From what you've told me, investing seems a lot like gambling. That's because in many ways, investing is like gambling, but in other ways, it's not. The point of centrist cockledry is this. While investing can be exactly like gambling if you follow the wrong strategy, specifically if you try to speculate. Another way to describe speculation is to call it active investing. Active investors buy stocks with the sole purpose of selling them after a short period of time. Understand? Do you even have to ask? Fair enough. Think of it this way. A speculator is a lot like a gambler playing the roulette table. The speculator invests in a company because they believe that company stock will rise over a short period of time. If the stock price does go up, the speculator plans to sell their shares at just the right moment to make the most profit. Then they'll take that profit and invest in a different company and repeat the process all over again. In other words, a speculator is trying to time the market. Time the market? Speculators believe they know exactly when stock prices are going to rise and fall. Like gamblers, they think they know when to hold them, when to fold them, when to walk away, and when to run. Does speculation work? Oh, Marx, no. Speculation is how most investors lose money in the market. Without gambling, the only way to win at speculation is to be lucky or cheat. The biggest issue with speculation is what we call the vicious cycle of greed and fear. Let's say there's a company whose stock isn't worth very much. Maybe it's a new company just getting started, or an older company that fell on hard times because of an outdated business model. Either way, this company's stock price is low. Now for some bizarre reason, people start investing in this company's stock. Maybe there's a new CEO. Maybe there's an exciting new product. Maybe a bunch of internet trolls want to f*** with Wall Street. Because investors are showing an interest in this company, its stock price starts to go up and up and up. When the price of the stock rises so quickly, it reaches the ears of the mainstream media. Soon, everyone is talking about this magic company that has seen enormous growth in its stock prices. Imagine some poor proletariat who hates their job hears about this magic company and about the investors who are becoming millionaires overnight just by investing in this one stock. At this point, greed kicks in. Believing he can make a quick buck, our proletariat decides to buy some of the stock, just when everybody and their babushka decide to do the same thing. Because our proletariat is greedy, when everyone else is greedy, he buys his stock at a high price. But that's okay because this stock is a sure thing. Soon, he'll be able to sell his shares for millions of dollars and then buy a mansion where he can sip champagne out of a sex worker's belly button. But, as always happens with every stock speculation, the bubble bursts. Overnight, the price of this magic stock, this sure thing, plummets and our poor proletariat who only wanted to consume a variety of spirits out of a sex worker's variety of orifices is now owner of stock that is worthless. And now, fear kicks in. As our proletariat watches the price of his stock fall, he realizes that with each passing day, he is losing money. So in his terror, he decides to sell his stock so he can get some of his money back. However, our proletariat is fearful when everyone else is fearful, so he sells his stock at a much lower price than when he first bought it. Thus, the ultimate result of his speculation is that he has bought high and sold low. All through history, there have been various stock bubbles that have burst and cost investors billions, if not trillions of dollars. It's because of the vicious cycle of greed and fear that most people leave their money in the bank, where it will stay safe and decrease in purchasing power by 2.99% every year. In order to avoid the ravages of inflation and the vicious cycle of greed and fear, we recommend passive investing or buy and hold. Instead of trying to time the market by buying and selling all the time, the average person looking to retire should just invest their money in the stock market and leave it alone until the day they have your money. Are you saying I buy stock in one company and hold on to it forever? Not exactly. Investing all of your retirement money into one company is not a smart idea. People who invest in just one company also keep their eggs in one basket. Damn it. Anyway, the reason it's a bad idea to invest in just one company is because under a free market, any corporation not receiving welfare from Congress risks failure. Of course, there are experts who say there are companies that can never fail because they're institutions of American life, to which we reply blockbuster and Kodak. Who? Exactly. In order to offset the pitfalls of the free market, every expert on investing will tell you to diversify, meaning you should spread your investments around into different companies so that if one basket falls, the others will hopefully be OK. Now, there are two ways you can diversify. Bolshevik Bunny, what do you think is the first way? I guess I could pick the stocks myself. You certainly could, but let me ask you a question. Do you enjoy reading corporations quarterly earnings report? No. Do you enjoy watching C-SPAN to learn how legislation will affect certain industries? Of course not. Do you enjoy reading the Wall Street Journal? Hell no! Enjoy reading the Wall Street Journal? No, nobody. Anyway, unless you have the time and energy to thoroughly research and analyze the stocks you want to invest in, you should probably not pick your own stocks. In fact, to invest at all, you probably should pay as little attention to the stock market as possible. How do I invest my money without paying attention to the stock market? Invest in an index fund. What's an index fund? An index fund is a type of mutual fund. OK, what's a mutual fund? A mutual fund is when investors pull their money together and hire a stockbroker to make their investments for them. And that's the same thing as an index fund? Not exactly. Most mutual funds are actively invested, meaning investors hire some Wall Street b---- bag to manage the fund because they believe they can beat the market. Beat the market? The stock market, as a whole, grows at an average annual rate of 7%. Investors hire Wall Street b---- bags to manage their mutual funds because they believe these Wall Street b---- bags can outperform the market. But the truth is, most Wall Street b---- bags don't outperform the market. In fact, five out of six mutual fund managers underperform the market. To add insult to injury, most mutual fund managers charge a high fee for their services, a fee taken out of your retirement savings. But hey, someone has to pay for the narcotics stockbrokers consume out of sex workers' orifices. So if I hire a Wall Street b---- bag to manage my retirement, not only will my investments not beat the market, but I'll be paying a high fee for just average? No, no, no, Bolster Big Bunny. If you hire a Wall Street b---- bag to manage your investments, you'll be paying a high fee for below average, which is why you should invest in an index fund. An index fund is a lot like a regular mutual fund, except instead of trying to beat the market, an index fund simply tries to match the market. Meaning, however the stock market performs as a whole, an index fund tries to match that performance. So instead of just betting on individual stocks or having some idiot pick your stocks for you, with an index fund, you're betting on the whole market. And in theory, this is a safe bet. Because as we've said before, the stock market as a whole has grown at an average annual rate of 7%, more than double the rate of inflation. Also, index funds are much cheaper than regular mutual funds because computers manage index funds. And as we all know, machines are cheaper than people. So if everyone invested in an index fund, there'd be fewer Wall Street b---- bags. And that's automation we can all get behind. Well, I'm on board. How do I start investing in an index fund? Well, now we come to a tricky gray area. Because the only way you can invest in index funds is to go through large investment companies that charge a fee for their services. And at this point, other personal finance experts would start listing all the companies they use to invest. Now I'm sure a small percentage of influencers are sincere in giving their honest recommendations for investment companies. But the truth is a vast majority of personal finance experts are just corporate shills who have sold themselves out to the highest bidder. Oh, I see. Because we're communists. We're not going to sell out to capitalism. No, as communists, we're happy to sell out to capitalism. But as a program trying to teach you about personal finance, our goal is not for you to blindly follow every instruction. There'll be plenty of time for that after communism establishes global hegemony. The real purpose of this program is far more sinister than communist indoctrination. We want people to think for themselves. Mother of Marx, no. Evil, isn't it? Because the only way you can think for yourself is to do your own research. Now, we won't leave you twisting in the wind. There are two books we recommend you start with if you want to learn more about investing and index funds. The first is the Elements of Investing by Burton G. Malkiel and Charles Ellis. And the second is The Simple Path to Wealth by J.L. Collins. Both these books are concise, easy reads that list investment companies that sell index funds. Of course, if reading a book is too daunting for you, you can always email us at communistfinance at gmail.com and we'll give you our recommendations for investment companies to use. Either way, if you want to retire early, educate yourself more about investing. Ignorance is the tool of the capitalist pig, so overcome ignorance and resist the pig. I'm Comrade Rourke and you are The Revolution. Music Produced in collaboration with H.L. Collins Public Media, if you have comments, questions or suggestions for future episodes, please email us at communistfinance at gmail.com or follow us on Instagram at comradrourke.