Why having values may lead to better investment decisions

On a personal level, my wife and I started thinking about ethical and responsible investment shortly after our first child was born. Being responsible for someone other than ourselves really meant a review of our priorities, and the importance of a 'legacy', for want of a better term.

You got that right

On a professional level, it took a little longer to get started. As I have said in an earlier blog posting, I had a boss who thought that 'ethical investment' was for hippies (his words), and was not something that he wanted discussed again. So I let it 'sit', but still looked for opportunities to introduce it into the practise, if an opportunity arose.

This 'opportunity' really hit home one day when I was speaking to a surgeon who was distressed to find that his investment portfolio continued an exposure to Philip Morris. He said he spent a good portion of his working week operating on oesophagus's (oesophagi?!) and lungs burdened with cancer, and could not and would not make money from a company selling tobacco products.

It was at this point when I realised; this surgeon is no hippy.

Not a hippy
 

Investments play a part in your wealth creation strategy.  Taking your personally held values, and using them to inform your investment decisions can lead to more active ownership and engagement in the process of what it is your trying to achieve.

So you think you have no investments? Almost everyone of working age in Australia has SOME superannuation. If you want to meet your goals, then you'll also need to put SOME money SOME where at SOME time, to help you to achieve this. It is possible to take the things that are important to you, and incorporate them into the investment decisions that you are making.

You can be comfortable that your investment decisions meet your personally held values, and also assist you to meet your financial goals.

Now people, we have analytics. I can see that there are page views. I'd love it, if you could leave a comment or two, to get a discussion happening, or just to hear your thoughts.  

You call that a wealth creation strategy?

I had someone say that to me once. We had spent an hour going through their Statement of Advice, and when we turned to the pages that outlined the recommended investments and their performance, they looked at the 'one year' returns, and said

"You call that a wealth creation strategy?"

Well I did as a matter of fact.

Now this was some years back, in around 2001. Those with a long-ish memory may recall that markets had NOT acted that favourably in preceeding years. However, there are two point that bear noting here. They are:

• short term returns are generally not that relevant in a long term wealth creation strategy, and
• returns are wholly irrelevant, if you haven't got anything to get a return on.

There is a bigger picture at stake that goes beyond what is happening over the short term, and even what is happening with markets in general. That is, step 1 of creating wealth, is to spend less than you earn. Step 2 is to do something smart with the difference.

There is no step 2, without step 1.

You may have a lump sum in super, or access to some equity, but it is the ability to direct free cash flow to the things in your life that are important to you, that will determine the outcomes of your financial strategies. It is that, that will predominately drive your position to the rewards that lie ahead.

 In the end, the strategy that I had recommended for the coupe included cash management, income and asset protection, debt ideas, an estate planning overview, asset allocation decisions and more. And yes, the recommended investment has gone up significntly in the ensuing years. But that is NOT the 'prize', it is merely the icing on the cake.