For years, the rustle of paper money and the clinking of coins were the soundtrack of our economy. But the times, they are a-changin’. Today, I’m putting my money where my conviction is: the future is increasingly digital, and that means betting on the powerhouses facilitating this shift – Mastercard (MA), Visa (V), and American Express (AXP).
I’ve long been influenced by the investment philosophies of figures like Ray Dalio, whose blunt assertion, “Cash is Trash,” resonates deeply with my perspective. Think about it: the cash sitting in your wallet isn't working for you. It’s stagnant, not accruing interest or any tangible return.
Contrast this with the ease and, frankly, the benefits of using credit cards in our modern economy. At virtually every vendor location I frequent, the price remains the same whether I’m swiping a card or peeling off bills. But the similarities end there.
My credit cards offer a compelling advantage that cash simply cannot: rewards. Depending on where I shop, I earn anywhere from 1% to 5% back on my spending. That’s tangible value being added to my transactions. Furthermore, by utilizing credit, I effectively gain an extra month of interest on the funds that would have otherwise been spent as cash. That money remains in my savings account, albeit for a short period, earning interest until the bill comes due.
Of course, I’d be remiss not to acknowledge the potential pitfalls. Credit cards are powerful tools, but they demand discipline. For individuals prone to impulsive or frivolous spending, the ease of "tap-and-go" can quickly lead to a mountain of debt if the full balance isn't paid off each month. The interest rates charged on revolving balances, while not levied by Mastercard or Visa themselves, can be exorbitant and negate any rewards earned.
This brings us to American Express. Amex occupies a unique space as both the payment network and the lender. They shoulder the credit risk directly, which likely explains their more selective approach to card issuance. Their reputation for premium rewards and customer service reflects this integrated model.
My investment strategy here isn’t about picking a single winner. I see the secular trend towards cashless transactions as a rising tide that will lift all these boats. Mastercard and Visa, with their ubiquitous network reach, are essential infrastructure in this digital ecosystem. American Express, with its loyal customer base and integrated model, offers a differentiated value proposition.
Ultimately, my decision to invest in MA, V, and AXP is a bet on the continued evolution of how we transact. Just as physical mail has given way to email, I believe physical cash will continue its gradual decline in favor of the convenience, security, and potential benefits offered by digital payments.
Price Movements of MA, V, and AXP
Based on available data for the year 2024, here is the approximate year-to-date (YTD) stock price performance for each company:
- Mastercard (MA): has a YTD return of about 23.46%.
- Visa (V): has a YTD return of roughly 21.39%.
- American Express (AXP): has seen a significant increase, with a YTD return of approximately 58.42%.
Important Note: These figures are based on the full calendar year of 2024. The YTD return is calculated from the closing price on December 31, 2023, to the latest available data. Stock prices are dynamic and change daily. It is essential to consult a real-time financial data source for the most current figures.
Disclaimer: Please remember that this is my personal perspective and should not be taken as financial advice. Investing in the stock market involves risk, and you should conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions.
