There’s probably not a human alive who doesn’t want to be rich. For most, I don’t think it’s the lure of extravagant mansions or luxury yachts that leads to the compulsion. No, I think people pursue money and fortune to get to the real treasure — freedom.

Financial independence offers freedom. Freedom to pursue our passions. Freedom to make mistakes. Freedom to take risks. Freedom from the 9 to 5, and to live life our way.

But wait… getting rich is hard, isn’t it? After all, not everyone can sing like Adele or throw touchdowns like Tom Brady. Not everyone has a brilliant mind like Elon Musk or Bill Gates. Not everyone can invest like Warren Buffett.

You’re correct. Not everyone can sing like Adele or throw TDs like Tom Brady. Not everyone has a brilliant mind like Elon Musk or Bill Gates. God gifted these individuals with skills and abilities possessed only by a select few.

But you’re dead wrong if you think not everyone can invest like Warren Buffett. And I’m going to tell you why.

The stock market is always going up

The stock market can often feel like an enigma. It’s composed of stocks, bonds, exchange-traded funds (ETFs), mutual funds and commodities (such as oil, natural gas, corn and even cattle).

Each of these assets holds a value which fluctuates from day to day. Oil is $80 per barrel today and $90 per barrel tomorrow. No one really knows what drives prices up or down on any given day, but the fact that prices fluctuate creates opportunity to make money. To the novice investor, the entire process can seem mysterious and daunting.

However, the only thing you really need to know is that from a long-term perspective, the stock market is always going up. That’s it.

Yes, from month to month or year to year the market may be down or sideways (2022 is a great example). But in 10 years, there’s a near 100% probability the value of the stock market will be much higher than it is today.

Don’t take my word for it, check out this 90-year chart of the S&P 500 index from Macrotrends. It’s charted on log scale because the linear version won’t fit on the screen because the S&P 500’s value today is astronomical compared to its value in the 1930s. That’s a good thing for investors. It means your money grew to astronomical heights as well.

FYI that bottom-left portion of the graph that goes straight down from around 50 to 5 is The Great Depression.

Why does the stock market always go up?

Okay, we’ve established that the stock market is always going up, but why is it always going up? Short answer — capitalism. Capitalism and the freedom to create is why the stock market always goes up.

The United States is the most blessed nation in the world. It’s home to some of the brightest minds and greatest companies of all time, both past and present. And these companies innovate, bringing value to the world and generating big profits in the process.

Fortunately for us, there’s a stock market, which is the greatest wealth-building tool of all time. It allows the average Joe investor (like you and I) to invest in these companies, become de facto part owners and share in the profits. The process creates wealth, lifting the economic and financial condition of the entire nation.

As long as capitalism exists and America continues to innovate, there’s a high probability the stock market keeps going up. Nearly 100 years of history support this claim.

Why does this matter?

Got it — capitalism is why the stock market always goes up, but why does any of this matter? It matters because it’s the first step to becoming rich. And it doesn’t take a brilliant mind like Elon Musk to comprehend it.

In spite of what you may think or have been told, you don’t need to be able to pick stocks to be a successful investor.

Don’t get me wrong, being able to do so is a priceless skill and one I encourage you to develop (here’s a little nugget to get you started). But it’s not a prerequisite to becoming rich. It’s more like an accelerator.

What’s beautiful about the stock market is that you can invest in American capitalism by buying a small stake in the 500 largest US companies — aka the S&P 500 index. You can do this by purchasing a S&P 500 index fund.

If you invest consistently, and purchase nothing other than an S&P 500 index fund your entire life, there’s a very good chance you die a multi-millionaire and your kids won’t have to work as hard as you did.

If your kids rinse and repeat this process, your grandkids may be spoiled rotten and filthy rich. That’s the beauty of compound interest.

The power of compounding

To show you the power of compounding, let’s take a look at an example. But before we do, you need to know that the S&P 500 returns around 10% per year on average. It’s actually very rare the S&P 500 returns 10% on any given year, but averaged out over many years it’s around 10%.

Compound interest in action

In this example, you’re an enthusiastic 15 year old who’s grandparents gifted you with $10,000 in a brokerage account. Fortunately, your grandparents subscribe to The Hindsight Investor and know a thing or two about investing. They put your $10,000 in a S&P 500 index fund.

Turns out you’re a hard worker. While in high school, you mow grass during the summer and say “my pleasure” at Chik-Fil-A during the winter. You’re able to save some cash and maintain that sort of work ethic until you land your first full-time job.

From the time you’re 15 until you’re 70, you contribute $500 to the S&P 500 index fund each month. The index fund performs similar to how it has the past 100 years and returns 8% annually.

Keep in mind, we’re not considering how much easier it’ll be for you to save $500 per month as you progress through your career. We’re sticking with $500 per month on average.

Obviously, as a 15 or 16 year old, it’ll be difficult to save that sort of money. But it’ll become progressively easier as you age (or at least it should).

On your 70th birthday, you login to your account to find that your $10,000 seed money from grandma and grandpa, plus your $500 per month contribution, has ballooned to nearly $6 million. You only contributed $330k, the remaining $5.7 million is thanks to compound interest.

Remember how the S&P 500 returns around 10% per year? Tell me, what’s 10% of $6 million? Think your 71 year old self can live off $600k per year? The numbers get almost comical at 80 or 90 years old.

Nobody wants to get rich slowly

Jeff Bezos — founder of Amazon, once had a conversation with Warren Buffett about Warren’s investing success.

Jeff says, “Warren, your investing strategy is so simple…you’re the second richest guy in the world, and it’s so simple. Why doesn’t everyone just copy you?” Warren responds, “because nobody wants to get rich slowly.”

I love that quote.

Folks, I hate to break it to you, but if you can’t sing like Adele or throw TDs like Tom Brady, getting rich is going to take a long time.

Buffett has another quote that I love.

In regards to his fortune he states, “I started building this little snowball at the top of a very long hill. The trick to having a very long hill is either starting very young or living to be very old.”

Final thoughts

If there’s one piece of advice and encouragement you get from this article, it’s to start early! Your 70 year old self won’t regret it. And to teach your kids, friends and family to do the same. Here’s a simple roadmap to get you started.

For most of us, building wealth is not a get-rich-quick scheme. Teaching yourself how to find individual stocks to buy can offer an accelerated course, but it still doesn’t happen over night.

But you can become rich. It’s just going to take a bit of hard work, consistency and…time.