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With it being Thanksgiving in the U.S. today, I thought of writing an article to make us all think about our actions. I’m going tell you upfront: I’m divided about this topic.
As an investor, I sometimes forget the overall impact of my actions. After all, the very first thing I’m interested in is making money. The reason why I invest money is obviously to use this vehicle to get richer, to reach my financial independence, and to retire wealthy and happy.
However, investing is a lot more than that. Our actions have an influence in life whether it be the way we consume, the way we raise our children, or the way we act in public or at home. When you invest, you also have an impact on the rest of the world. You might want to tell me that you and I won’t influence the market or the way business is done. You might as well tell me it doesn’t matter if you keep your car running for 20 minutes during winter time because you like your seat warm and cozy. After all, what’s one car running for nothing when there are millions of trucks rolling for 10 hours a day on our roads? I tend to disagree. I think we all have a role to play and that our actions have consequences, as little as they are.
Investing & Values
Over the past decade, various investing firms tried to find a way to market socially responsible investments. They packaged funds and ETFs with what they call “socially responsible companies” or “ethical investments”. Back in 2010, I even wrote a whole series about socially responsible investing. During this series, I’ve discovered something that distracted me from investing in those kind of packaged solutions.
The problem about ethics is that everybody has its own definition. We will all agree to the “obvious”. A company is making T-shirts in Pakistan and using children as slave labors in their factories? This is definitely a no-go. However, what happen with an oil company? What if the company follows protocols and respects both regulations and their employees? I know, now we have people that will nod and others that will cringe.
This becomes a dilemma because ethics doesn’t mean legal. There are tons of things you can do that are not ethical but are legal. Then, the line that was as obvious as the Grand Canyon becomes thinner and starts to blur. Depending on your background and values, one company may sound ethical for you while another doesn’t.
Another good example would be what happened in the banking industry. In the U.S., we have Wells Fargo (WFC) with sales malpractice. In Canada, TD got caught opening accounts clients didn’t need. Since I worked in the banking industry for a while, I can tell you that all banks have their “little skeleton” in their closets. I am not saying they are all doing or encouraging illegal sales practice. Far from it. But would it be possible that during tough times, they tend to be more salesy or find legal ways to offer products that are not 100% aligned with your interest? Will you stop investing in those juicy dividend payers based on this premise? Or will you wait until the bank is found guilty by a judge? Tough question.
What about your portfolio, Mike?
I believe in investing according to my values. For this reason, I’ve never been tempted by the tobacco industry. However, I have a few holdings that don’t exactly fit what I believe in. For example, I’m not pro-war or I don’t smile when I hear that my government is sending troops somewhere. Mind you, when Canada sends military support to another country, it is often to help, not to conquer. But isn’t that always what we tell ourselves when we go to war? That it is for the greater good? Did you know that to have a war, all you need is two parties thinking the same: they are doing it for the greater good?
Nonetheless, I invested in Lockheed Martin (LMT) a few years ago and I definitely like the company’s growth potential. But while I cash my dividend cheques, the world is not becoming a better place with F35s over our heads.
I also own shares of Andrew Peller (ADW.A.TO), a wine maker. So it’s okay for me to own wine companies, but not cigarette makers… Do you see how the line isn’t that obvious anymore? The difference is that I enjoy my glass of wine but I wouldn’t smoke. When they’re adults, I won’t mind if my children drink wine (moderately off course), but this would be another story if they smoke. Speaking of which, what do you think of Marijuana stocks? Will it become an ethic investment once it’s legal? Just some food for thought…
I’m all for investing according to your values, but let’s not go overboard with this. My best stock, bar none, over the last 15 years has been Altria (MO). Of course, they sell tobacco, but what a great cash generator! I don’t lose sleep over it, since up to last week, the Vatican was selling cigarettes on its property.:)
Hello Michel,
I think you just show us all how ethics and value can be seen differently 🙂
MO has been quite popular among dividend investors and I can understand why!
It is a tough one to answer because you can argue either way.
I believe that as a retail investor investing in the secondary market, not investing wouldn’t have any effect on the company’s business.
You could also argue that if everyone on the contrary seeks ethical investments, you would soon have to pay a premium for the “good-guy” stocks and the “bad-guy” stocks will end up being at a discount, providing a better dividend yield for the investors who are willing to bite the bullet and be the “bad-guy”.
I like reading your articles on The Dividend Guy. I will soon be launching a new stock analysis platform for like-minded investors, uuptick. Take a look at it, and if you like what you see, maybe we can figure out a way of working together/partnering somehow?
Best Regards,
Sam
Hey Sam!
send me an email at dividendustries@gmail.com and we can discuss. Congratulations on your project!
Mike
Definitely not. There is something immoral about trading. For someone to make money, someone else needs to lost it (there is finite amount of money in the society). However, if socially conscious investing gives better returns I would give it a try. I believe lots of sovereign wealth funds follow socially conscious investing.
That’s a very interesting point of view. I never though about it that way! But if you continue wit that line of thought, you are probably working because someone else isn’t…There is a finite number of job too, for one to have a job, means another elsewhere may not have it (however, the ratio is not 1:1 as it is in the stock market).
Cheers,
Mike
Interesting. I have thought of changing my portfolio a bit. I love investing in renewables. I think its the future and love the green idea! That being said im not selling my enbridge holdings. I think there is definally a market for natural gas. Oil might be viewed differently 20 years from now though. I like to own stock of companies i deal with though. Makes me feel better giving them my business. Dope stocks really get me thinking. Right now they arent profiting though and once its legal everyone can grow 5 plants. Ill plant a couple in the yard and hopefully they pay me dividends!
Cheers
Those plants will definitely generate dividends! hahaha!
I put $9k in Arise, a solar panel manufacturer traded on tsx. I believe the ticker is was apv. Shortly after that I lost every cent of it. It seemed like beneficial tech w a future. It was not. So beware.
Hello Bram,
any investment in “new technologies” is riskier. What Telsa does for example (offering a high quality electric car) is a good mission, but won’t necessarily end-up making profit for investors!
Cheers,
Mike.