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How Unethical Investing Gave Us MANY TIMES MORE MONEY Than the Average Investor

Updated: Apr 14

In the last 3 months, portfolio returns/recovery has gone up significantly. Some people have been critical...because they don't like China.

A 48.57% return across a 3 month period.

Frankly, I've been relieved to see my choices validated after a particularly challenging 2022. Times like this remind me that investment returns can be volatile - even 128% within a year is possible. READ ALSO: Differentiation - How an Understanding of It Took My Investment from $12,000 to $45,000 in 1 Year

I spent almost all my career focusing on specializing at investing, even at the potential detriment of sales or business. I guess it's because at the heart of it, investing is still absolutely wonderful to me even after all these years later.

Like many others, I wish I had learnt about investing earlier. I was already brought up to be a reasonably good saver thanks to my family, but I never took advantage of my excess capital for years.

So it's only natural that every now and then, I get into a situation where I have to confront the harsh reality of investing and how potentially unethical it can be in the eyes of many.

Ethics are subjective moral principles at the end of the day: but being so involved in coaching and teaching investing, you inevitably come across the potential idea that perhaps I made my money off the backs of others suffering. Which is really what investing can be - taking advantage of situations to make money.

And I don't deny it, nor would I change a thing.

I'll give you some examples: and you can decide for yourself - is investing even ethical?

And what should we do with this information?

1) Taking Advantage of Vices/Human Weakness:

One of the things I've been keeping an eye on is ESG Investing. I've even written two papers on it for IFPAS (Insurance and Financial Practitioners Association of Singapore) on top of my lectures there as an investment specialist.

'Sustainable' or 'Responsible' Investing has become increasingly popular in the last few years to the point that ESG (Environmental, Social, Governance) is a household term in the investing world.

Many investment firms are trying to take advantage of this moral trend, especially amongst the youth, to align morals with investment returns.

Having done extensive research and published articles on such topics, my opinion is that on the SURFACE this is a good thing for society and a reasonable effort.

Unfortunately, the reality is that humans can really only afford to be moral about things like the environment and avoiding vices when you are in a prosperous situation.

Often when the opposite occurs, morals and investment returns typically get thrown out the window.

S&P 500 index result with Money Maverick

One of the clearest indications that this happened was when the Ukraine-Russia Conflict began to have a much more evident effect on the rest of the world.

There was a serious energy crisis globally, especially against 'enemies' of Russia like the United States, and neighboring countries that were normally reliant on Russia for energy, such as Europe.

Layman logic would suggest that Clean Energy companies would thrive in an environment where called upon to produce as much energy as possible when the world needs it most.

But the results were quite different. Clean Energy companies across the entire world went into steep decline for many months instead.

Growth of Hypothetical for S&P with Money Maverick
A -19.6% decline. The energy index would have +30.3% in the same period.

By May 11, the world's biggest and best Clean Energy stocks had not only contributed little to the world's lack of energy supply, but also declined by 19.6% for investors.

Conversely, over this same period, Traditional Energy such as Oil, Coal, Gas and other forms of well-known pollutants of the earth: did 30.3% over the same time period from the beginning of the year.

Growth of Hypothetical chart with Money Maverick
The Energy Index typically consists of environmentally unfriendly companies.

It is not surprising, but a little ironic that the biggest and loudest proponents of social causes are the ones that immediate drop the 'moral and ethical ball' once people start to experience things like lacking heat, or starving, or the financial inability to purchase expensive clean energy solutions.

Exploiting knowledge of Human Vices and Behavior has made it possible to invest in sectors that reap substantial reward when the rest of the market falls into recession.

2) Taking Advantage of Human Psychology: Huge Rewards for Little Risks

I often get a comment that investments are risky and that's why people avoid them or absolutely refuse to get involved with it, especially when it comes to using part of what would be their 'retirement budget.'

Usually this has reasonable merit, but I would argue that my experience has shown that most people didn't have enough money for retirement anyway.

In other words, even if you're worried about risking your retirement budget, the reality was that you likely didn't have enough for retirement anyway and were on an unavoidable risk to begin with.

That's often why I got into a talk with them in the first place - compared to a situation where you have someone deciding at an old age that they would like to raise their standard of living NOW, or SOON, by taking advantage of compound interest.

We know several things:

1) Portfolio > No Portfolio: A broad market approach with a decent mix of stocks and bonds - inevitably goes up in the medium to long term.

More importantly than a basic DIY, I've coached plenty of consultants to learn how to differentiate between the different types of stocks (geography, sector, value/growth) and bonds (high yield corporate junk bonds vs short term duration, convertible) which would have predictable future results.

That's part of why Financial Consultants still have jobs despite the easy access to investment products in today's day and age.

But since human psychology is generally more risk adverse, it's easy for me to take advantage of others who don't take action in these situations.

READ ALSO: Geographical Risk - How I've Comfortably Beaten The SNP500 By Double Digits Year To Date

2) Cash < Inflation: Comparatively, cash never really increases in value, and fixed deposit products are always offered BELOW the inflation level of that country.

With a portfolio, in the short term it's a coin flip as to whether or not your money can grow to have a better quality of life later on, while without a portfolio you have no chance whatsoever.

The answer has always been obvious to me, although it's always easier said than done. Practice makes perfect and I tend to be able to reap huge rewards from the stock market since I know that people are less involved than myself or likely to give up more easily.