Captain Jack Sparrow in the movie “Pirates of the Caribbean” has been forced ashore by a mutinous crew. We see him stranded on an island drinking rum with his lovely companion beside a fire. They are discussing his ship. “It’s not just a keel, a hull, and a deck and sails. That’s what a ship needs. But what a ship is, what the Black Pearl really is . . . is freedom.” As an idealistic young investor in the ‘80s I felt the same way about the investment of my retirement savings. Those investments represented financial freedom. What do your financial investments mean to you?
With the passage of time life gets more complicated; deciphering financial statements and reviewing all the investment options available can leave us bewildered. We may have a sense the ship has run aground. We feel disconnected from the original meaning or purpose of our investments. Is our money working in accordance with our values, that is, working in a way that matters to us?
When we invest in stocks or bonds we are essentially investing in business. Let us consider an example of investment in a small local business. A sausage maker is trying to raise half a million dollars to start a business. You may know the chef personally or know of his or her reputation. You’ve enjoyed the products and respect the passion for and commitment to making a wonderful sausage using the best organic ingredients. A number of people come together to invest in this business. They might lend to the business (becoming bond holders) or provide equity (becoming stockholders.) The investors provide the capital that allows the business to be born.
The Importance of Our Financial Investments
Think about the importance of these collective investments and the value they bring. Providing all the capital himself could be a huge personal risk for the sausage maker. So the risk is shared among the investors, none of whom assumes a risk that he or she cannot afford. In fact, each investor may benefit financially while serving the needs of the community in a delicious way. The act of investing serves an important and critical function in our economy.
On a personal level, you the investor have put your hard-earned money into this project for a variety of reasons, some of which may be pride in being involved with such a high-quality product, a belief that people will love the sausage and the expectation that you will receive a good return on your investment. You appreciate the chef’s commitment to sustainable practices. You believe in his/her ability to be a good manager and careful steward of the capital you have invested in the business.
As with any investment there are risks, but you feel you can understand them. The business may fail after a few years or you might not get the return you had hoped for. You have invested with the sausage maker based on your priorities and values, some of which you share with the sausage maker. You care about his success not only because you want a good return on your money but also because you love the products. Your life seems richer for having experienced them. The relationship between the business and you as an investor is very tangible and personal.
How This Relates to Investing For Retirement
Investing for our retirement years now seems so far removed from this paradigm. How can investing in a 401k, an IRA or a mutual fund have that kind of meaning? Making choices here is not like investing with the sausage maker. You own stocks and mutual funds. Are the managers of these companies or funds people whom you know and trust? Do you have the same faith in them as you do in the sausage maker? Do you believe they are competent and considerate stewards of your capital?
Certainly we care about our investments and realize they are important. They may mean the difference between subsistence and being able to afford to do some of those things we’ve always dreamt about. However, this type of investing is not the same as putting our money with the local guy, whose success we are rooting for.
How To Make Investing More Personal
Your financial investments can start to become more personal by checking in with yourself. Remind yourself why you are investing. What do your investments really mean to you? They may represent financial freedom. Perhaps they are your security or the potential to live your dreams. They may give your children the head start that you never had. Just as you would expect the sausage maker to be a careful steward of the investment you’ve entrusted to him, your first responsibility in investing is to yourself. Your investments are important assets in your life. By making investments more personal you will derive greater satisfaction from them and increase your chances of feeling successful in the process.
Purpose, Meaning and Values
How do you create a sense of purpose and meaning in relation to your investments? The very act of investing demonstrates a belief in our country and in our way of life. Your capital is precious and important. How you invest it matters. Investing in promising medical research or a daycare center in a blighted urban area allows you to get a financial return on your money while reinforcing your belief in businesses you feel deserve support. Naturally, you need to balance these two objectives in order to protect and grow your nest egg. Examine each investment by asking, “Is this working for me, and in a way that supports my priorities and vision for the future?”
You are the captain of your ship. Chart the course of your financial investments in ways that support your values and priorities. Voting with your precious investment dollars can make a difference in the world.