The growth of the stock market is powerful and profound, fueling the wealth of the 62% of Americans that own stocks, and particularly the top 1% of Americans who own roughly 50% of the overall stock market. We propose a novel solution to increasing ownership of stocks among everyday Americans: we are building a way to get a mortgage to empower long-term investing in financial assets. In order to explain why we are building this new mechanism, we must address why a lower percentage of Americans own stocks than they do homes.
One of the key drivers behind wealth from home ownership is the invention of the home mortgage. The home mortgage makes home ownership accessible. Instead of spending your entire life saving up to buy a home, a mortgage enables you to unlock ownership earlier. And hopefully, over time, the value of the home you purchase will exceed the cost of paying down the mortgage you needed to buy it. Hopefully.
The problem with home ownership is that it’s not for everyone. It exposes individuals to an extremely concentrated form of risk (some homeowners have had explosive wealth growth, while others have barely outpaced inflation), and that it carries maintenance costs that are increasingly out of reach for Americans without significant savings.
The stock market has grown nearly 3 times faster than the price of houses for the past century. That is not an exaggeration. The average annual growth in house prices in the United States from 1900 to 2012 was 3.1%, barely outpacing inflation. Meanwhile the stock market has ripped on an annualized basis of over 10% per year. There is no doubt that there is and will always be a compelling list of reasons for Americans to own homes. But our mission is to make meaningful ownership of the stock market – on a long-term and passive basis – as accessible as it is to buy a home.
We want to enable the average American to pull forward their life savings and benefit from compounding earlier on. Thanks to pioneers like Jack Bogle who invented the index fund, the stock market is accessible. But meaningful ownership is still far out of reach for most Americans. We strive to build a new kind of democratic wealth creation, largely unknown in the history of American financial markets.
Today, our product is as simple as we can make it. We take the process of getting preferred equity financing to unlock a larger upfront participation in the appreciation of the S&P 500, while also handling all of the legal, financial, operational, and technological hoops.
It is a gargantuan undertaking to bring Basic Capital to market, and we need all of the grit and intellectual horsepower we can find to help us make it a reality for more and more people. If you’re excited about this idea, check out our open jobs, or send us a note. If you’re interested in being a Basic Capital member, sign up here. If you have questions, comments, or feedback, send us an email.