Basic Capital combines the three greatest financial inventions of the 20th century into what we believe will be the greatest financial invention of the 21st. In order to understand how Basic Capital works, you have to understand these three inventions. Let’s dive in.

Invention #1: The Mortgage

The Federal Housing Administration (FHA) was established ninety years ago in the wake of the Great Depression. The FHA’s singular aim was to promote homeownership by creating a standardized and streamlined way for Americans to finance the purchase of their homes and escape the never-ending cycle of rent. 

The FHA Mortgage still exists today: the ability to purchase a home with a down payment—a small portion of the total price—while paying off the remaining amount in small installments over a 30-year period. It was the original "buy now, pay later," if you will.

The power of the FHA Mortgage is that it allows everyday Americans to amplify their purchasing power, making homeownership attainable. It lets people pull forward—or present value—the rent payments they would have made over time and use that value today to generate wealth through real estate.

Invention #2: The Index Fund

Only fifty years ago, Jack Bogle launched what was then the first index fund available to everyday investors. An index fund allows everyday investors to invest in a broad basket of stocks, enabling them to benefit from the stock market in a simple, passive way—without the need to pick individual stocks or actively manage a portfolio. His philosophy was simple: 

“Don't look for the needle in the haystack — just buy the haystack!” 

Since then, Bogle’s philosophy has been repeatedly proven and has become widely accepted as the standard wisdom for investing.

Invention #3: The Limited Liability Company

The dean of Columbia Business School famously declared that the “limited liability company is the best invention of the 20th century,” because it allows business leaders to take risks and invest in ventures without jeopardizing their entire wealth.

Before the invention of limited liability protection, business losses could exceed the amount an individual invested, potentially putting all their personal assets at risk. The LLC changed this dynamic by limiting losses to the amount contributed or invested in the company.

The LLC is incredibly powerful because it enabled investors to take calculated risks while capping their losses at the amount they’ve invested.

While this approach is widely used by business leaders and the ultra-rich to pursue big outcomes while limiting downside risk, it remains largely inaccessible to everyday individuals, primarily due to the high administrative costs and the need for legal expertise.

As a result, those who could benefit most from the possibility of a good outcome are often unable to access this type of calculated risk-taking without exposing themselves to total financial ruin. 

Combining these three concepts into one

First, we believe there should be an equivalent of the FHA mortgage for investing — a way to access more capital upfront in order to buy long-term financial assets like index funds. Basic Capital does this using preferred equity financing rather than loans.

Second, we believe that the best way to invest is the Jack Bogle way: buying and holding a diversified index fund.

Finally, we believe everyday people—no different than the ultra-rich—should have access to tools that allow them to take calculated risks for significant outcomes while limiting their losses. In sum, we are building a way for everyday Americans to benefit from more purchasing power to invest in diversified index funds on a limited liability basis.

Phew. If you’re still with us, we salute you, and . . . we have more to say. For example, you might be wondering: Why would someone give me capital to invest in the stock market?