The rate of interest on ordinary loan amounts, and, if a creditor receives security, to only 2 and one-half percent. Therefore, even the wealthiest men are forced to buy stocks, and there are people who do not sell them when the prices have fallen in order to avoid a loss. But they do not sell at rising prices either, because they do not know a more secure investment for their capital. Moreover, in this kind of investment, their funds can be recovered in the quickest way.

Confusion of Confusions, Joseph de la Vega, 1688

This is the first known reference to a litany of reasons why wealthy investors buy stocks. They have been a great place to store wealth over the centuries, and even more so, they are often much more appealing than debt, even when measured against it in uniform ways. There are ways to compare the returns of different asset classes, and much of the asset management industry focuses on the proper proportion of stocks versus bonds. We are big believers in the equity asset class. We would remind investors that they can usually get all the same benefits of fixed-income investments using stocks that have high dividends.

The first book ever on stock markets was aptly titled Confusion of Confusions. This book shows that many of the problems we face in markets today are perennial and will likely always plague investors and risk-takers. Surprisingly, options, penny stocks, and market manipulation were all established features of markets in the 17^th century.

The book is an illuminating look into how markets have stayed the same in many ways despite the furious pace of market change over the past century. It’s important to distinguish the perpetual market dynamics from more temporary problems markets face, like the paper-crunch in the 1970s, which was solved first by shortening the trading week and then eventually by technological changes. Yes, markets are in some ways constantly changing. Yet, we are also perpetually facing the same problem of groups of human beings being subject to mania, panics, and the type of herd behavior that regularly transpires into market routes of varying length and severity.

Investors buy stocks to get rich, right? While undoubtedly this motivates some people, just as many people are likely motivated by staying rich. Even though stocks are a claim on residual income, many management teams also give investors direct cash payments called dividends. They were getting access to the consistent cashflows that dividends provide as one of the primary reasons folks would buy stocks. There are only so many places you can put your money, and over time, stocks have repeatedly been demonstrated to be one of the safest and most lucrative ways to invest your funds.