November 8, 2011
Conventional wisdom tells us that investing should be a "selfish" endeavor. Greed is good in this one case because we want to prepare for our financial future which may include college for the kids, funds for retirement, or other future financial obligations. Therefore, maximizing the potential for financial returns seems logical.
Jesus seems to give credence to a healthy self interest when He said, "Love ... yourself". I'm purposefully leaving out the other three "fairly important" words of His statement to make the point that Jesus does seem to indicate that a healthy self interest is OK. How can we love our neighbor without first loving ourselves?
The obvious fallacy, though, in the conventional, "selfish" or "self-only" approach to investing is that it, at least on the surface, leaves out concern for how our investment decisions might affect our neighbor. Therefore, if we want to align better with Jesus, maybe we should modify our motives for investing to INCLUDE our neighbor. But, there are three important questions to consider:
Do our investment decisions even affect our neighbor?
How does one include "love of neighbor" in our investment decisions?
Critical question: If I invest to help myself AND my neighbor will it negatively affect my financial returns?
Let's take a quick look at the first question. The short answer is, "yes". It is hard to imagine that our small part, even though for some it may be millions of dollars, can affect public companies or the overall stock market which is valued in the trillions. But, the reality is that investment capital is very powerful and has a significant effect on the companies in which we invest. It is why public companies allocate sizable resources to "investor relations" and, as such, take great pains to communicate with their shareholders. Most public companies like to have a stable of loyal, long-term shareholders. It helps their financial ratios, keeps their stock at competitive levels, and contributes to their ability to acquire new capital for growth and expansion. So, yes COLLECTIVELY shareholders can and do make valuable contributions to public companies which in turn contribute in positive or negative ways to their employees, customers and communities all of which are our "neighbors".
Probably the best answer to the second question is to simply ask your investment professional if he would help you integrate your values with your investments. There are numerous mutual funds, separate account money managers and alternative investments that have emerged over the last several years that address the issue of "concern for neighbor" as well as offering potential for competitive financial returns. Our firm has developed a strategy of providing a way for investors to partner with companies that best reflect the Timeless values upon which America was founded. Supporting these companies with investment dollars helps them positively affect our culture with their values-driven approach to supplying life-enhancing products and services.
One straightforward way of discerning whether a public company has their neighbor in mind when operating their business is to look at the mission/vision/values statements that are often posted to their web site. One such statement I have often admired is from one of our American Hero Companies. It reads, "We firmly believe that our Company is a powerful vehicle through which we channel our time, talent, and energy in pursuit of the fundamental goal of serving God by serving others." If this company truly means what it says and is sincerely striving to do this, then owning the stock would be a way to partner with them to help our neighbor.
Whether we want to admit it or not, the third question about the potential for negatively impacting our own financial returns often cuts to the quick. We are programmed from birth to think we live in a "zero sum" world. Therefore, if we use any resources, heaven forbid our investments, to look out for others then we won't have enough for ourselves. The reality is that caring multiplies. More concern for others usually means better outcomes for others AND us. I have to be reminded of this because I tend to be very competitive and lose sight of "win-win" propositions. Nevertheless, it is generally true that what goes around comes around. Our experience, with over 10 years as a registered investment advisory firm, has been that public companies whose upper management subscribe to a high level of values and ethics tend to have competitive financial results over the long term. (This is not always the case, and care should be taken when investing in the stock of any public company, which involves the potential loss of some or all of the funds invested.)
It's interesting to note that the majority of active money managers, those who make financial returns their primary goal, do NOT beat the market averages. Could their lack of financial success be a factor, at least partially, of their motive for investing? In other words, could a "self-only" approach to investing actually be an obstacle to competitive financial returns? Just a thought to ponder.
In summary, I believe it is reasonable, practical and possible to incorporate concern for our neighbor into the process of building our investment portfolios.
Carter LeCraw, CEO
American Values Investments, Inc.