In this article, Perth Tolle, founder of Life + Liberty Indexes, explains the importance of freedom in building wealth and economic prowess, and why it is a core hallmark of her strategy.
There is no wealth without freedom.
Last March, I read a story to my nine year old about how people used to think the earth was flat, until they saw a lunar eclipse. Upon seeing the earth’s round shadow on the moon, they realized that the earth was in fact round. This reminded me of short-termism in investing, when we see only our immediate surroundings and miss the big picture. But that’s none of you. You are moon watchers, I know by the way you invested last year. And I hope you will continue to be rewarded.
To celebrate new beginnings, I’d like to take a step back and examine the foundation of our strategy at Life + Liberty Indexes. As investment managers, we focus on growing wealth, but how is wealth created? The answer leads to the “why” of our investment thesis.
How does freedom create wealth?
Wealth is created when free people use their energy and talents to provide something of value to others. The freedom of individuals to decide how to direct their efforts to its most productive capacity is the basis of wealth creation. Without freedom, there can be no wealth. Since each person has intrinsic and unique creative potential, each person’ s freedom must be equally protected.
On a national level, freedom is the most foundational precondition for economic growth. In an oppressive regime, few people hold power and wealth is a zero sum game. The only way to have wealth is to be one of those few and to keep everyone else from fair competition. Innovators are considered a threat. In a free system, on the other hand, wealth can be created by anyone providing something of value to improve the lives of others. With freedom, wealth is no longer a zero sum game, and innovation is celebrated.
Moreover, by connecting through trade, people who would be enemies in an unfree environment become customers, partners, and colleagues in a free one. So, in addition to allowing for wealth creation and encouraging innovation, freedom also promotes peace.
Free people using their creative abilities to improve the lives of others are the source of wealth and the driver of sustainable growth. In a world where freedom levels are rapidly diverging, countries with higher relative freedom levels – and therefore the necessary conditions in place for wealth creation – are ground zero for the growth stories of the next decade.
That's the foundation of our strategy.
The Freedom Fund
In 2020, the Freedom 100 Emerging Markets Index (FRDM index) underperformed broad EM in the drawdown due to having no China exposure, then outperformed both broad EM and ex-China EM in the recovery. It cost our investors nothing in relative performance to promote freedom and exclude autocracies. We’re doing well by doing good.
In April, the FRDM index was named Index of the Year 2019 by ETF.com. We know many of you nominated us for this award, and we are so grateful for your support.