Ethical Investing

https://seekingalpha.com/instablog/12055951-seriouscat/5380107-ethical-investing

Summary

I am a talking cat on the internet. Not a financial adviser.

I have no idea what I am doing or talking about. If I did, I would have better uses for my time.

Views change over time. Earlier I was what most people would consider an "ethical investor", but as time has gone on, I'm "evil". But that's really a narrow viewpoint.

What is an ethical company? $JNJ saves and benefits billions of people, yet contributed to the opioid crisis. $DIS provides the sweetest children's movies you can find, yet censors its content at the Chinese government's decree. It is easy to crap on companies like $XOM until you have no heat or no way to commute.

The biggest misunderstanding at-the-moment, which is most relevant, is a difference between capitalism/socialism/communism and democratic republics/democracies/republics/dictatorships/despotism. As a lucky citizen of a democratic republic, I am f'ing appalled by some of the actions that North Korea, Russia, China, etc. are doing. And yet as a capitalist, I have and do own Russian an Chinese equities. Why?

How do stocks work? If I don't own $CHL, does China Mobile go out of business? If I don't own $MO, will people stop smoking? No. Shares are issued as a dilution of existing equity in order to bring additional funding to the company. So ethically, if you participate in an IPO or additional equity issuance, you are consciously providing capital to a company to expand their business. But if you acquire shares on the open market, the company gets zero financial benefit from you doing so. That equity is already out there.

So now that we have a better understanding of whether or not you are funding "evil", let's look at holding long-term. If you hate the company's actions, then when it comes time to vote at shareholder meetings, the more shares you own, the more influence you have to correct this. The more shares you own, then if vocal, the more influence your opinion has to institutional investors that usually don't do due diligence before voting. So in its own real world way, owning shares of "evil" companies is more ethical than not, as you have more of a voice to stop them, as opposed to allowing other "bad guys" to profit.

But really, those views shouldn't affect short-term/medium-term traders. Every trade is a win or a loss. Everyone has their rationales, and one trader comes up on top. And the moves are inherently based off of greed. So if some panicked tobacco/China/etc. investor dumps some stock below its intrinsic value, only to have another tobacco/China/etc. investor gladly pay a premium to what you paid a while later, how is that ethically wrong? The shares would have traded hands anyway. How would not partaking fix anything?

Ultimately, being good or bad person is a cumulation of an entire life of choices. If you feel guilty about a trade, volunteer. Donate. Spend time teaching children. At a bare minimum, round up donate at Panda Express. 

Disclosure: I am/we are long CHL.

Additional disclosure: I am a talking cat on the internet, not an investment adviser.