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.
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.
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.
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.
After all, if much more people were into the stock market, especially people who I don't have vested interest in, the less effective some of my strategies would be.
3) Taking Advantage of Harsh Realities
I've asked clients before if they understood the potential moral implications of investing. Very rarely do they get it, until I come up with an example.
The news of Nike paying poor wages and neglecting health standards (sweatshops) in order to maximize profits is not a new story - it's been actually well publicized since the late 1990s.
While corrective measures have been taken to address some of it, even as recently as 2019 it was reported that Nike received the worst ratings in a Tailored Wages UK Report, quoting "The brand can show no evidence of a Living Wage being paid to any workers."
Yet 40 years of stock history, Nike outperformed the SNP500 tremendously.
If you had invested $1000 in the SNP500 on 27 August 1982, you would have approximately $33,648.20 gross of fee, about 33x your initial capital.
But if you had invested in Nike instead, which you know for a fact carries out unethical practices to maximize profit, you would have made $348,290.30 in the same time period: more than 10x the index, and 348x your capital.
In the world of capitalism, Nike is hardly an exception and proponents of human rights would obviously have a problem with this...
...but would you?
Having taught consultants and clients for years on exploiting such opportunities in the market, I do occasionally find myself plagued with a reasonable nightmare due to these thoughts and wake up in a cold sweat.
But I think about how much further my invested money will bring a higher quality of life to people who I care about the MOST, and I end up sleeping like a baby at the expense of others and enabling companies like Nike.
How about you?
Closing Thoughts
When I was working sales as a representative and not an entrepreneur, there was already a pretty negative social stigma attached to it.
Embracing the fact that the ideas I speak of, or even enjoy - may have morally or ethically grey areas is not a huge leap for me.
I've always thought of investing and those who shared my investing philosophies and beliefs as a 'Us Against Everyone Else'. It is easy to uphold ethics when your house is not on fire.
If a neighbor had been bitten by a zombie and their family was trying to seek safety in your house, would you let them in knowing there was a chance they had been bitten and could infect your family? The easy answer for me is no.
I WOULD let others who I don't love as much suffer, before letting it happen to those closest to me.
It's not the most ethical way to live, but it's been the most profitable one for me.
Because short of a loving and supportive community, life is often about conflict as much as it is about cooperation.
Whether it's through work or investing, life is a competition. It may not be a complete zero-sum game, but someone else often has to lose for you to beat the market.
Money Maverick
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If you're looking to seek potentially higher returns in the market even AFTER this knowledge, you can feel free to contact me at 91769099.
I can qualify and refer you to consultants with competence and integrity in this area.