Why Stocks Go Up (And Why That Matters for VEQT)

The Foundation

Every article on this site — every argument for buying VEQT, holding through crashes, and ignoring the noise — rests on one foundational claim: stocks, as an asset class, go up over time.

This isn't blind optimism. It isn't "past performance guarantees future results." It's a structural feature of how equity ownership works — and understanding why is the difference between an investor who holds through a 35% crash and one who panics and sells.

What You Actually Own

When you buy a share of stock, you're buying a tiny piece of a real business. Not a lottery ticket, not a chip at a casino — a legal ownership claim on a company's future profits.

That company employs people who wake up every day trying to make the business more profitable. They develop new products, find new customers, cut costs, and reinvest earnings. The company's employees, managers, and executives are economically incentivized to grow the business — their jobs, bonuses, and stock options depend on it.

When you buy VEQT, you own approximately 13,700 of these businesses across 50+ countries. You own a slice of human economic ambition worldwide. Some of those companies will fail. But in aggregate, the collective effort of millions of people working to build profitable businesses has produced positive returns for equity owners in every major economy, over every long period in modern history.

The Equity Risk Premium

Here's the key concept: stocks are riskier than bonds or GICs in the short run. They can drop 30%, 50%, even 80% in severe cases. This risk is real and can be devastating if you need the money soon.

But because stocks are riskier, they must offer higher expected returns to attract investors. If stocks returned the same as a government-guaranteed GIC, no rational person would accept the volatility. The extra return that stocks provide over risk-free assets is called the equity risk premium.

This isn't a reward for being brave. It's a structural feature of capital markets: risky assets must compensate investors for bearing that risk, or no one would buy them. As long as risk exists — and it always will — the premium exists.

Professors Eugene Fama and Kenneth French, whose research on asset pricing won Fama the Nobel Prize in Economics, have documented this premium across every major market and time period studied. Dimson, Marsh, and Staunton, in their comprehensive analysis of 23 countries over 125+ years, found a global equity risk premium of roughly 3-5% per year over government bonds.

That 3-5% per year, compounded over decades, is the engine behind long-term wealth creation through equity investing. It's why $1 invested in global equities in 1900 would be worth over $700 today in real (inflation-adjusted) terms.

Why the Global Economy Grows

Zoom out far enough and the trend is unmistakable: global economic output grows over time. World GDP has increased in roughly 85% of years since reliable measurement began. This growth isn't magic — it's driven by:

Population growth. More people means more workers, more consumers, more economic activity. Even as population growth slows in developed countries, emerging markets continue to add billions of participants to the global economy.

Productivity improvements. Technology, education, and specialization make each worker more productive over time. A farmer today produces vastly more food than a farmer in 1900. A software developer creates tools that multiply the output of entire industries.

Innovation and reinvestment. Companies reinvest profits into research, development, and expansion. Today's profits fund tomorrow's growth. This reinvestment cycle is the fundamental driver of compound returns.

Human ambition. This is the intangible that underlies everything else. Billions of people wake up every day trying to improve their lives and build better businesses. That collective effort, aggregated across the global economy, produces growth.

When you own VEQT, you own a diversified claim on all of this. GDP growth translates into corporate earnings growth, which translates into stock returns over time. Not linearly, not predictably in any given year — but reliably over decades.

Every Crisis Feels Like the End

If stocks always went up smoothly, everyone would own them and there would be no risk premium. The premium exists precisely because stocks sometimes crash — and when they crash, it feels permanent.

The pattern repeats with eerie consistency: a crisis arrives, markets plunge, headlines declare the end of an era, experts predict permanent decline. Then, gradually, businesses adapt, economies recover, and markets reach new highs. The recovery always seems impossible until it's already happened.

This isn't to minimize the pain of crashes. A 50% drop is agonizing. It takes years to recover. People lose real money if they sell at the bottom. But the historical record is unambiguous: global equities have recovered from every major crash in history, and investors who held through the worst periods were rewarded.

Individual Stocks vs The Market

Here's a distinction that matters enormously: individual stocks can go to zero. The global market cannot.

Enron went to zero. Nortel went to zero. Individual companies fail all the time — it's a healthy part of capitalism. When you bet on a single stock, you're accepting the risk of permanent capital loss.

But a diversified global index — like what VEQT holds — is structurally different. For VEQT to go to zero, every one of 13,700 companies across 50 countries would need to simultaneously fail. That scenario isn't a market crash — it's the end of civilization. And if civilization ends, your GIC isn't going to help either.

This is why diversification isn't just a nice-to-have. It's what transforms equity ownership from speculation into investing. VEQT doesn't bet on any single company, sector, or country. It bets on human economic activity continuing — the safest long-term bet you can make.

Why This Time Isn't Different

Every generation of investors believes their crisis is unique. The 2008 financial crisis felt like the end of the banking system. COVID felt like the end of normal life. Rising interest rates feel like the end of easy money.

But the mechanism that drives stock returns — businesses creating value, reinvesting profits, and growing over time — doesn't depend on any specific economic environment. It works through inflation and deflation, through war and peace, through pandemics and prosperity. The equity risk premium has persisted through two world wars, a Great Depression, the Cold War, oil embargoes, tech bubbles, financial crises, and a global pandemic.

That doesn't mean the next decade will look like the last. Returns vary enormously across periods. But the fundamental reason stocks go up — the equity risk premium, driven by human economic activity — has no expiration date.

What This Means for VEQT

VEQT is a bet on continuity — not on any specific country, company, or economic forecast. It's a bet that:

• The global economy will continue to grow over the long run
• Businesses will continue to create value and earn profits
• The equity risk premium will continue to compensate investors for bearing risk
• Diversification across 13,700 stocks will protect you from individual failures

These are not heroic assumptions. They're the baseline conditions that have held across every major economy for over a century. They could theoretically stop holding — but if they do, every investment strategy fails, not just equity investing.

When your VEQT is down 25% and the headlines are terrifying, this is what should anchor you: you don't need to know when the recovery will come. You just need to believe that human beings will continue working, innovating, and building businesses. The rest follows.

The Takeaway

Stocks go up over time not because of luck, not because of central banks, and not because prices are on some predetermined upward path. They go up because you own pieces of real businesses run by people who are working to make them more valuable.

The equity risk premium is the engine. Diversification is the safety mechanism. Time is the fuel. VEQT gives you all three in a single ticker.

The only thing it can't give you is the conviction to hold. That comes from understanding why.

Sources & Further Reading

• Dimson, Marsh & Staunton, Credit Suisse Global Investment Returns Yearbook — global equity returns across 23 countries over 125+ years
• Eugene Fama & Kenneth French — foundational research on asset pricing and the equity risk premium
• Jeremy Siegel, Stocks for the Long Run — long-run equity return data
• Aswath Damodaran, NYU Stern — equity risk premium historical dataset
• Ben Felix, "Expected Returns" — Common Sense Investing (YouTube)

---

This article is for informational purposes only and is not financial advice. Past returns do not guarantee future results.