MacroHint

Investing Morally

Is There Such Thing as Bad Profit?

Is there such thing as good or bad profit? Should you invest in companies that hurt people but bring profits to shareholders? Both of these questions require us to be introspective. I have done my fair share of thinking about my investments from a morality standpoint recently. Many had this dilemma during the 2008 global financial crisis.

See the source image

At the peak of the crisis a handful of investors bet that the housing market would collapse and were right. They made billions for their investors (and themselves) while millions across the world lost their retirement savings, homes, and sources of income. THIS is a dilemma. Weren’t the fund managers doing their job and delivering returns for their clients? Yes. Were millions of lives affected by what they were profiting from? Also, yes.

It’s complicated.

Personal

It is hard to have much regard for the consequences of your investments (especially when they’re performing well) but it’s important to consider how your actions impact others. One of my biggest dilemmas has been owning stock in Nike. The company has performed well for me but as I was sifting through articles about their labor and human rights violations, I felt dejected.

While I am a customer and think that Nike will be around for a very long time (and checked off my other due diligence boxes), I’m not investing morally. If Nike was a company that was performing poorly, I would be more open to selling it and falsely justifying the sale, saying I did it for “ethical” reasons.

Morality is investor specific. Will you be able to sleep at night knowing that you are invested in a company that deploys child labor and pays employees far below minimum wage? It might not be something that has ever crossed your mind; it only crossed mine when I read the aforementioned articles.

You live and learn.

Do you Believe in what the Company does?

I love Nike shoes; they are practically the only brand I wear. My Nike shorts are comfortable and I enjoy wearing them around the house or while playing sports with friends. In a sense, I believe in what the company sells, however, I do not believe in how they make it. This is an important distinction to make.  

See the source image
Founder of Nike, Phil Knight

Regardless, whether I am buying a share or two of Nike stock or buying shoes with a swoosh, I am encouraging and rewarding their behavior. If you are all about stock performance and nothing else, buying Nike stock does not seem like a bad idea. However, If you are an investor that is more conscious of the impacts of your investments you would not buy Nike stock.

Sidenote

I feel the need to mention that I am not trying to excessively pick on Nike (many other companies engage in similar practices). I only use Nike as an example because they have been in the news lately and have been accused of violating international labor laws in the past.

Social Investing

Most retail investors (me and you) do not invest in companies to perpetuate social change or for the sake of making the world a better place; our goal is to grow our wealth over time. Should you even care about the social impacts of your investments at all? As long as the stock performs well and your trading account increases in value isn’t that all that matters? That is up to you.

Control

There is only so much that you can control. You are not on the board of directors and you cannot effectuate any sort of meaningful change. What you can control is whether or not you buy the stock (or eventually sell it).

Companies today are focusing more on their social impacts and their contributions to society (which is good) and is likely a trend that will continue. It will become easier in the future to buy shares in companies that have a sound moral compass and that seek to provide value for the stakeholders instead of only shareholders.

On the other hand, if you like a company that focuses only on maximizing profits and keeps its head down on social issues, that’s your choice too.

To be Emotional or not to be Emotional; THAT is the Question

I try to not get too emotional about the stocks that I buy. Generally, as long as the share price is increasing over time, the company’s financials are solid, and the outlook for the company looks stable, I feel secure. In many respects, I want the company to be out of the press as much as they can be. My dream companies are the ones that perfect their craft and expand in silence.

Being commonsensical and levelheaded has helped me make solid investment choices in the past.

How should you invest?

Introspection is key when you are considering the consequences of your investment actions. Having the choice to buy or sell (or not buy stock at all) is a personal choice that should never be taken lightly. Some say that profit is profit and the rest is junk while others prefer more moralistically sound profit.

I am somewhere in the middle but have become a lot more thoughtful about what I am actually investing in. Regardless of where you are on the spectrum, it is important to know where your companies lie so you can better tailor your portfolio to your beliefs.

If you have any questions or thoughts please feel free to reach out by emailing macrohint@protonmail.com or fill out the form on our Contact page.

Stay informed and take the hint

Leave a Comment

Your email address will not be published. Required fields are marked *