If Everyone Prioritized Side Hustles, Wouldn’t Your Index Funds Fail?
Your financial freedom depends on most people staying in the rat race
Index funds are rapidly becoming the preferred investment for many of us, especially those striving for early retirement. Betting on the broader economy with exposure to every sector and region while minimizing fees is extremely popular, and for good reason. To know that a piece of ANY positive performance in the market can be captured in your portfolio is a tremendous way to create asymmetrical reward vs risk with your investments. Whether Apple (AAPL) exceeds expected sales of iPhones, Coca-Cola (KO) adds a profitable new brand to its beverage lineup, or Verizon (VZ) capitalizes off of the 5G wave, an index fund tracking the broader market can capture this performance and compound the gains over many years.
As much of my own portfolio is in index funds, it is important to me that I internalize the idea of business ownership with my investments. I don’t just see shares in a brokerage of a Vanguard Total Stock index (VTI), but ownership of every public company in the United States. This way, when I go about my day and see thousands of people doing their jobs, I can be assured that many of them are working to keep my portfolio growing. This includes everything from service roles like the cashier at Walgreens (WBA) to the engineers at Google (GOOG) building the next major disruption to our digital lives.
Everyone who is in the “rat race” essentially works for the owners of capital supplying their businesses. That’s essentially what Capitalism IS. As an index fund investor tracking the US market, YOU are among the owners of capital across roughly 3500 American companies. It is important to know that this is true across all socioeconomic levels. For example, a barista at Starbucks (SBUX) works to drive value for Starbucks’ shareholders. That same person can also own shares of Facebook (FB), directly or via an index fund, and know that Mark Zuckerberg is effectively working for her (albeit to a microscopic degree).
More than ever, people are seeking a way out by becoming owners of capital
More and more middle class workers are understanding that capital ownership is the path to financial freedom, investing regularly into index funds with automatic contributions to the extent in which they can. They know their magic number of invested funds that would allow them to quit their job, pursue their passions, or simply take an extended break or mini-retirement.
The problem with this is that the plan relies quite heavily on most of the rest of society remaining plugged into the matrix, so to speak. If a critical mass of people left their corporate jobs to become content creators, it may drive value for social media companies, ad platforms, website hosting services, etc., but does little in the way of driving anything meaningful for the broader market (and therefore your index funds). The irony of financial independence is that it relies quite heavily on the masses remaining financially DEPENDENT on their corporate jobs. Therefore, we can only truly pursue our individual passions in business when we can be confident that others cannot…
Is it selfish to pursue our passions when we need others not to?
It depends on who you ask, the owner or the worker. My initial thought when asking myself this question was that it is a bit selfish. However, if the passions we pursue are adding value to our communities, future generations, or the underprivileged, then it may be more selfish not to pursue them.
How we spend our time and the impact our activities have on those around us is ultimately how we can gauge our selfishness or selflessness on a daily basis. The question is not whether having enough in investments to pursue our passions is selfish, but whether our passions themselves are selfish. If you can honestly feel good about how you channel your energy and talents to provide value to others, then you have nothing to apologize for in having your investments propped up by hard working employees around the world.
Final thoughts
The paradox of a capitalist economy is that it is simultaneously the express lane to wealth while also being the greatest Ponzi scheme in the history of the world. Hard work and economic value makes wealth flow uphill, and the game is to gain higher ground on that pyramid throughout your working years.
Throughout your wealth building journey, index funds as your main growth vehicle will never suffer from a mass exodus of its constituents toward side hustles. The reason for this is that for most of us a sustainable side hustle is a privilege granted to us only after putting in our dues within the system, a cycle which repeats with each generation of new workers.
If you ever leave a toxic but successful company while retaining an ownership stake in it, you may actually have a vested interest in it remaining toxic in order to drive results for you. If that makes you feel sick, it should. However, what YOU can control is to accumulate appreciating assets as quickly as reasonably possible. Then, and only then, can you give back to the world without restriction or regret.
Disclaimer: This article is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making major financial decisions.
