Author Topic: do not want to invest in stock market  (Read 22192 times)

karabara

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do not want to invest in stock market
« on: July 14, 2013, 09:07:15 PM »
Hi,

My husband and I are pretty frugal.  We like the MMM philosophy, except for the part about investing in the stock market.  My husband, in particular, thinks that most big companies on the stock market are not places where we would shop (like Walmart), and so we should not invest in those companies. 

I tried to look for a MMM answer to this question, but I have not found it. 

What would a Mustachian say?   Does  MMM approve of, for example, Walmart?  or does he not care about whether or not he likes Walmart, he just wants a high return?

If you don't want to invest in stocks, what do you recommend?  We are thinking about municipal bonds. 

Any thoughts or advice would be most appreciated,
Kara

dragoncar

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Re: do not want to invest in stock market
« Reply #1 on: July 14, 2013, 09:27:21 PM »

karabara

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Re: do not want to invest in stock market
« Reply #2 on: July 14, 2013, 09:34:19 PM »
OK.  Thanks for that thread. 

Any comments on my second question?  What about municipal bonds?

m8547

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Re: do not want to invest in stock market
« Reply #3 on: July 14, 2013, 09:37:17 PM »
You could invest in a small cap index fund, or be selective about the industries you invest in. For example, Vanguard's small cap index fund, NAESX, has the following ten largest holdings:

1         TripAdvisor Inc.
2         Rock Tenn Co.
3         Fortune Brands Home & Security Inc.
4         Tesla Motors Inc.
5         Onyx Pharmaceuticals Inc.
6         B/E Aerospace Inc.
7         Cheniere Energy Inc.
8         Polaris Industries Inc.
9         Valspar Corp.
10         Fidelity National Financial Inc.

You can see the full list here (but the data is older, so the order is different):
https://personal.vanguard.com/us/FundsAllHoldings?FundId=0048&FundIntExt=INT&tableName=Equity&tableIndex=0&sort=marketValue&sortOrder=desc

There are all sorts of funds you can invest in without walmart. There's mid-cap, international, REITs, etc.

dragoncar

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Re: do not want to invest in stock market
« Reply #4 on: July 14, 2013, 09:52:08 PM »
OK.  Thanks for that thread. 

Any comments on my second question?  What about municipal bonds?

What about them?  I didn't see a question.

karabara

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Re: do not want to invest in stock market
« Reply #5 on: July 14, 2013, 09:58:42 PM »
Would municipal bonds be a good investment?  a "Mustachian" investment?

dragoncar

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Re: do not want to invest in stock market
« Reply #6 on: July 14, 2013, 10:24:55 PM »
Would municipal bonds be a good investment?  a "Mustachian" investment?

It can be, if it meets your personal goals.  I'm not sure what you're looking for -- do you need more information on municipal bonds?

Khan

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Re: do not want to invest in stock market
« Reply #7 on: July 15, 2013, 01:05:18 AM »
IMO, you have to check your moralities at the door when investing in the stock market. Do I not like Wal-Mart's business practices, and it's treatment of employees? **** no. Do I think Walmart provides a somewhat important public service(incredibly low prices, possibly outstripping the public harm that the company does to communities?) Possibly. If I'm invested in Walmart, can I turn around the profits I make from it, and do better things with it? Yes. As a consumer, you can avoid to the maximum extent possible, supporting some companies, but in the end, some of your money will end up in the hands of the Koch brothers, DOW chemical, Monsanto, etc. But as an investor, you are simply looking for returns on your money, and attempting to avoid said companies, to the extent of even leaving perfectly good index funds on the table, really hampers that return.

Name a company, and I guarantee you there is dirt on it. The question is whether it's in your face dirt, or not. Target? How about some chinese labor? Apple? Foxconn. Hell, Foxconn is a good answer for almost any tech company.

Hell, just do a google search for "moral investing", and you'll see how hard it is.
http://www.knoxnews.com/news/2013/jun/15/david-moon-the-difficulty-that-comes-from-moral/
http://www.fool.com/investing/small-cap/2004/11/22/the-myth-of-socially-responsible-investing.aspx

dragoncar

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Re: do not want to invest in stock market
« Reply #8 on: July 15, 2013, 01:41:49 AM »
IMO, you have to check your moralities at the door when investing in the stock market.

This is the "is it moral to live off other people's work" thread all over again.  (https://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/living-off-of-other-people%27s-work/).  Any company is ultimately making money at the expense of someone else.  Is it moral?  See the above link for five pages of discussion.

bUU

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Re: do not want to invest in stock market
« Reply #9 on: July 15, 2013, 03:47:52 AM »
Many lifestyle choices carry with them consequences, sacrifices, costs. You need to evaluate for yourself whether the choice is worth the cost or not.

pom

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Re: do not want to invest in stock market
« Reply #10 on: July 15, 2013, 04:04:33 AM »
There are some responsible investment funds out there. You should discuss that with you husband.

Wouldn't you want to invest in companies that builds bridges and roads, or do research to cure rare diseases. Regarless of your stance, there are companies out there that are the right investment for you.

Why would Muni bonds be any better, isn't there plenty of corruption in municipalities around the globe?

Khan

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Re: do not want to invest in stock market
« Reply #11 on: July 15, 2013, 04:28:11 AM »
There are some responsible investment funds out there. You should discuss that with you husband.

Wouldn't you want to invest in companies that builds bridges and roads, or do research to cure rare diseases.

As I said before, name a company and I can name something wrong with it. You know who builds lots of bridges and roads? Haliburton. You know what company earned lots of no-bid contracts from the government to build those and other structures in Iraq/Afghanistan? Haliburton. Government corruption at it's finest.

Cure rare diseases? Not without lots of financial incentives after discoveries have been made, such as patenting the BRCA gene, or charging very high $$$'s for very specific drugs that cure very, very specific symptoms.

Solve world hunger? Look no further then Monsanto, which has done much to increase the availability of food stocks around the world. Monsanto, renowned for suing farmers for cross pollination, self destructing seeds, etc.

grantmeaname

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Re: do not want to invest in stock market
« Reply #12 on: July 15, 2013, 05:47:11 AM »
You could invest in a small cap index fund, or be selective about the industries you invest in.
Small companies are magically more moral than large ones?

fiveoclockshadow

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Re: do not want to invest in stock market
« Reply #13 on: July 15, 2013, 06:59:05 AM »
Besides everyone else's comments to the effect you will likely only be kidding yourself with such a plan, I'd add that selective investing is the least effective way to affect change. The stock market is a secondary market - the company isn't getting any of your money. Only indirectly do you affect the secondary market price that will then affect the price of a new issue from the company in the future (assuming there is one).

Basically the stated premise "I shouldn't invest in a place I wouldn't buy from" holds little water. The two actions have little equivalence. It would be a bit like saying "I won't buy a used item if it was originally purchased at Walmart".  I think you are going to spend a lot of effort making yourself feel better with no actual social benefit compared to index investing and more charitable giving.

As to muni-bonds those tend to only be sensible in taxable accounts as their return is poor without the tax advantage. If you have been paying attention to how municipal financing works in a lot of places these days you might not think this is such a social good.

If you can find a fund that focus on "good" businesses that is probably a better option. But you will likely pay at least 1% a year in direct and indirect costs compared to index investing. Decide whether that is worth the warm fuzzy feeling or if 1% of your portfolio in charitable giving might go further.

These are hard questions, and I think it is easier for most people to just ignore them - so good for you to at least take the time to consider it. Think it through and you should be able to come up with something that you are comfortable with, gives decent return and allows you to make the social change you hope for.

karabara

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Re: do not want to invest in stock market
« Reply #14 on: July 15, 2013, 08:05:03 AM »

Basically the stated premise "I shouldn't invest in a place I wouldn't buy from" holds little water. The two actions have little equivalence. It would be a bit like saying "I won't buy a used item if it was originally purchased at Walmart". 

I don't understand this.  Please explain.  Maybe I don't know enough about investing, but I don't see why the premise "I shouldn't invest in a place I wouldn't buy from" holds little water.
« Last Edit: July 15, 2013, 08:08:45 AM by karashane »

bUU

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Re: do not want to invest in stock market
« Reply #15 on: July 15, 2013, 08:34:32 AM »
I'm not sure what fiveoclockshadow meant, specifically, but perhaps he was alluding to the fact that you probably cannot as readily successfully invest for your future if you object to investment vehicles that have any association with the vast majority of market capitalization. Is there sense in investing in everything except that which does especially well (because to do especially well, in this market environment requires a certain amount of exploitation of one sort or another - capitalizing on the work of others, keeping a percentage for the enterprise instead of returning a fair share of all the gains to those who's work brought about such profits, etc.)?

There are "ethical funds". I invested in one ten years ago (AMAGX) and don't regret it, but would you consider it ethical? They have significant holdings in Apple, Google, J&J, Church & Dwight, Novartis, TJX, etc. Lots of companies that someone, somewhere, has an ethical objection to. And the reality is that fund comparable to ethical funds, missing only the socially-conscious bias, tend to do better. (Compare AMAGX to ADGYX, for example.)

So, in essence, depending on the extent of your ethical concerns, you could be facing the prospect of changing your expectations for your future - switching to a distinctly contrarian approach to living in our society, dropping much further down in terms of standard of living, so as to be able to save enough of your income in such a way that respects your ethical standards but still leaves you with enough to accomplish your goals. You could be doubling or tripling the percentage of your income that you need to save each month (and therefore quintupling [or more] the reduction in discretionary income you have available - such a decision could even result in math that doesn't work out - i.e., a requirement to save more money each month than you have left after paying for the basic essentials).
« Last Edit: July 15, 2013, 08:52:13 AM by bUU »

mgreczyn

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Re: do not want to invest in stock market
« Reply #16 on: July 15, 2013, 08:41:25 AM »

Basically the stated premise "I shouldn't invest in a place I wouldn't buy from" holds little water. The two actions have little equivalence. It would be a bit like saying "I won't buy a used item if it was originally purchased at Walmart". 

I don't understand this.  Please explain.  Maybe I don't know enough about investing, but I don't see why the premise "I shouldn't invest in a place I wouldn't buy from" holds little water.
He means there is no evidence that your decision not to invest in a company makes any difference whatsoever to that company.  Unless you are deciding where to put your spare $1 billion, it won't affect the stock price, it won't affect the company's operating results, it won't give management any incentive to behave or not behave in a particular way, in short it won't affect anything beyond your own brokerage account and your conscience.  Please don't get me wrong, you can absolutely decide not to invest solely based on your morals.  However, your decision not to shop at Wal Mart probably has a much greater effect on Wal Mart than your decision not to buy Wal Mart stock.  If you think Wal Mart is the devil, but stands to do well as a company, then don't shop there but do buy their stock.  Spend your profits at Whole Foods or something.  If your purpose in deploying your money is to feel good, give it to your favorite charity.  If it's to make a little bit of money into more money, invest it with as little emotional involvement as possible.  Whether you invest in Wal Mart or not should hinge only on your risk appetite, understanding of their business model and analysis of the value of the company.  That said, there is some merit to the idea that if you don't shop there or use the company's good/service, you are less likely to understand the company and their business model, thus perhaps you shouldn't invest simply because you won't know whether things are going well or going poorly.   

The reason you have so little impact is that the overwhelming majority of investor dollars in the market are institutional dollars, by which I mean pension funds and the like (if you really want to tie yourself in a moral knot, just imagine how much money all the firefighters and teachers of the world stand to loose should Wal Mart go under...).  Those institutions and rare large players like Buffet and Icahn are probably the only investors who would be capable of changing a company's behavior through the buying, not buying or selling of a company's shares, and I'm pretty comfortable saying that the only consideration that will ever impact those organizations' buy / sell decisions is whether or not they will make money.  You or I choosing not to invest $1000 in Wal Mart makes zero difference to Wal Mart, but it could make a huge difference to you or I. 

Index funds may be an amoral option from your standpoint, in that how "good" a company is has zero bearing on whether they are in the S&P 500 or not.  It also involves a whole lot less work, rather then analyze individual companies you simply buy the index at whatever price it's at when you want to invest.  Municipal bonds are not the stock market, they are a very specific subset of the bond market. 

Hope that helps; if you want to know more you could read J L Collins' blog post series on stocks.  He advocates an exceedingly simple indexing strategy.  Here's a link to Part 1: http://jlcollinsnh.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/

fiveoclockshadow

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Re: do not want to invest in stock market
« Reply #17 on: July 15, 2013, 08:56:58 AM »

Basically the stated premise "I shouldn't invest in a place I wouldn't buy from" holds little water. The two actions have little equivalence. It would be a bit like saying "I won't buy a used item if it was originally purchased at Walmart". 

I don't understand this.  Please explain.  Maybe I don't know enough about investing, but I don't see why the premise "I shouldn't invest in a place I wouldn't buy from" holds little water.

First of all, I should be clear - when it comes to moral or ethical questions there are few absolutes or rules.  So really, the two could be equivalent in that sense if someone chose to view it that way.  However, my point is the two are not equivalent at all in real effects on the business whose behavior you are trying to change.

Shopping at Walmart directly contributes to their business by increasing their revenues and profits.  If no one shops at Walmart the company goes out of business, or perhaps they have to change their business practices.  If enough people don't shop at Walmart it matters to Walmart.  So if you don't like how Walmart does business then not shopping there is potentially an effective way cause change.  Sure, you are diluted amongst millions of shoppers - but there is at least a direct connection from your action to a negative impact on Walmart's bottom line.

Not purchasing Walmart shares has no such effect at all.  You are not buying shares from Walmart.  You are buying shares issued by Walmart long ago from a secondary market.  Walmart already got the money from that issue of shares long ago and your purchase has no impact on them.  So, roughly it is like buying a used bike from someone who originally bought the bike from Walmart.  Walmart doesn't care if that person sells the bike used to you or anyone else, they already got the revenue from the bike.  Whether you buy the used bike or not will not in anyway encourage them to change how they run their business.

Now, there are secondary affects.  But what they are with regards to you purchasing the shares is not at all clear.  Here are just some:

- Buying Walmart shares increases the price which means if they want to issue new shares in the future that price might be slightly higher resulting in more money going to Walmart at some point in the future.
- Not buying Walmart shares lowers the price and as a result the voting share members might encourage the board to increase profits by lowering costs (i.e. crush their suppliers more and lock more workers inside the building during midnight shifts, exactly the behaviors you were trying to prevent).
- Buying shares increases the price, potentially encouraging the board to continue the practices they are already engaged in that you don't like.
- Not buying Walmart shares lowers the price, and if it goes low enough they will eventually just take the company private - potentially a net benefit to the very business people at Walmart you don't want to reward.

So, as you can see the end result of buying or not buying a share of Walmart is unclear.  It may be a net social good or not.  On the other hand not shopping at Walmart is much more directly connected to the social good you are trying to achieve.

Finally, consider the Koch brothers.  They've made lots of money with questionable ethics.  And now they use all those profits to try to steer public policy to even nastier levels of bad.  Money, sadly, is power.

There is another growing movement out there full of people who make lots of money but spend very little.  Unlike Mustachians they do not have early retirement as their goal despite their constrained spending.  They give almost all their money away.  They work in whatever industry their skills give them the greatest income and then direct that income at charities for as long as they can productively work.  In many ways these folks have an outsized impact, potentially saving far more lives than someone who decides they don't want to work in banking, or law, or the defense industry because of a "ethical concerns".  You can make as many witty protest signs you want and stand in front of the White House for a year, but the investment banker making 350K and giving 300K of it away actually did a whole lot more to make the world a better place.  Again, money is power - for good this time.

Since it is not clear that whether you buy or don't buy particular equities has any net impact on those businesses but it definitely has a net negative impact on your returns perhaps you'd be better served by just index investing and using the additional returns reaped for more direct social good? 

You can still very sensibly boycott business by choosing where you shop and what you buy - that does have direct effect.  But picking and choosing equities based on ethics is unlikely to have any effect but will cost you money.  Money that could be used for more direct social good.

DoubleDown

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Re: do not want to invest in stock market
« Reply #18 on: July 15, 2013, 10:13:38 AM »
I just read an article yesterday where a reader asked this very question. The answer offered by the financial writer was that it is very difficult to achieve two goals at once (earning a good return on investments + exercising your own ethics in the process). It's already been summed up in this and previous threads, but he recommended separating those goals -- that is, invest in order to make money, and do other things to assert your ethical principals, including using your money earned by investing in ethical ways like donating to charity or supporting causes you believe in.

But you can't wrap up both at the same time very well. It would be a little like saying "I want to get promoted at work while raising my children well." Those are both noble goals, but combining them doesn't really work.

yolfer

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Re: do not want to invest in stock market
« Reply #19 on: July 15, 2013, 03:21:39 PM »
The way I see it, I'll become FI sooner by investing optimally. At which point, I can retire and devote my time to causes that I care about (volunteering in schools, park cleanup, etc). When you look at it that way, investing in these "bad" companies (however you want to define it) is actually a socially responsible behavior, because it gets me nearer to the chapter in my life when I can effect the most positive change in the world.

Because of this mindset, I don't "hold my nose" when investing in the Total Stock Market, I actually look forward to putting more money into all the funds in my stache (regardless of the companies in those funds).

chucklesmcgee

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Re: do not want to invest in stock market
« Reply #20 on: July 15, 2013, 03:47:30 PM »
When I consider too that the amount I have in these companies' stock isn't even a millionth of their revenue and in no way will influence what they are or aren't able to do, I really care a lot less. "Oh  but if everyone did that..." Don't soak me with your hippie Koolaid. If everyone did that, then we'd have a say in companies' management decisions and elections and be able to change how they're run.

karabara

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Re: do not want to invest in stock market
« Reply #21 on: July 15, 2013, 04:48:05 PM »
Wow.  Thank you all for the thoughtful replies.  I am *almost* convinced. 




karabara

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Re: do not want to invest in stock market
« Reply #22 on: July 15, 2013, 05:03:40 PM »
I just had an tiny epiphany. 

Every year, my family participates in the March Madness NCAA tournament by filling out brackets and seeing who does the best.  My husband always jokes that he should just pick all number 1's and would he do better doing it that way, than trying to predict the actual winners. 

The total index fund is just that.  It is a control of sorts.  So I am not buying it because I support the individual companies.  I am buying it because on average, it is the most likely to win. 

Hmmmmm.........we'll see what my hubby thinks of that argument.

Will

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Re: do not want to invest in stock market
« Reply #23 on: July 15, 2013, 08:46:09 PM »
I just had an tiny epiphany. 

Every year, my family participates in the March Madness NCAA tournament by filling out brackets and seeing who does the best.  My husband always jokes that he should just pick all number 1's and would he do better doing it that way, than trying to predict the actual winners. 

The total index fund is just that.  It is a control of sorts.  So I am not buying it because I support the individual companies.  I am buying it because on average, it is the most likely to win. 

Hmmmmm.........we'll see what my hubby thinks of that argument.

Yeah, I do all kinds of fantasy sport "pick'ems" and I end up picking a lot of teams I do not "support" because I think they have the better chance of winning. 

karabara

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Re: do not want to invest in stock market
« Reply #24 on: July 15, 2013, 09:07:40 PM »
Has Mr M. M himself ever weighed in on this topic?

grantmeaname

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Re: do not want to invest in stock market
« Reply #25 on: July 15, 2013, 09:12:07 PM »
Not that I'm aware of.


karabara

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Re: do not want to invest in stock market
« Reply #27 on: July 19, 2013, 08:19:31 AM »
OK, so I'm back and please bear with me if I sound naive or simplistic.   

I agree with much of the Occupy Wall St protests that the rich, powerful are too rich, powerful.  I also think we should support Main St, not Wall St.  And now I am going to put my money in Wall St by investing in the stock market?

I am convinced:  if you are going to invest in the stock market, then you should invest in the All Stock Index.

I am having trouble with: why should I invest in the stock market at all?  (given what I said above)
« Last Edit: July 19, 2013, 08:24:17 AM by karabara »

bUU

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Re: do not want to invest in stock market
« Reply #28 on: July 19, 2013, 08:49:31 AM »
Essentially the reason to invest in the stock market is that there is no better means to accumulate the resources you're going to need to live through retirement, standing up for the values you place priority on.

fiveoclockshadow

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Re: do not want to invest in stock market
« Reply #29 on: July 19, 2013, 09:02:38 AM »
I agree with much of the Occupy Wall St protests that the rich, powerful are too rich, powerful.  I also think we should support Main St, not Wall St.  And now I am going to put my money in Wall St by investing in the stock market?

So the question is are your actually putting your money in Wall St by investing in the stock market?  It sort of sounds like a silly question (is the sky blue) but actually the answer is sort of subtle.

The key to understanding the wealth, excesses and abuses of "Wall Street" is to understand that "Wall Street" doesn't really care if the market goes up or down, if the investors they claim to represent retire or go bankrupt, or if the businesses they provide capital to succeed or fail.  All "Wall Street" really cares about is that money churns.  Buy, buy, buy - sell, sell, sell!  That's how they make money.  Stock goes up and someone decides to sell it, they make money.  Stock goes down and someone decides to sell it, they still make money.  In the very best of worlds for Wall Street people will give a broker direct control of their money so that the broker can decide how often to buy and sell - a true fox guarding the hen house kind of situation.  Better still people will often pay a fee to have a broker churn their money for them - all to the detriment of the investor but great for the broker's bonus.  And for those who decide "stupid brokers, I'll trade myself and save money" there are entire media empires (WSJ, CNBC, Bloomberg, etc.) that will scream and shout "helpful" advice at the DIY investor all of which is founded on more buying and selling as fast as humanly possible. 

And even for those cases in which it is hard to get people to buy and sell like mad there are still clever ways to generate a profit.  For instance make sure everyone knows they should constantly contribute to a 401k, convince employers that new employees should have default deferrals into their 401k account.  These are actually really good ideas, but in some cases there is a catch in which a firm will charge exorbitant fees to the employees (hidden of course) in their 401k plan.

And then there is the whole "too big to fail" scheme as well.

The point is, all these excesses have nothing at all to do with the actual companies whose stock you might purchase.  Wall Street only cares about the transaction, not the companies being transacted.  They want the transaction and management fees.  That's primarily where the evil is, not in the company stock itself.  Capital markets are the foundation of the modern world since the late middle ages, they are a net good but there is a big leach attached in the form of Wall Street firms...

Consider, instead, index investing through a company such as Vanguard.  By index investing you generate very few transactions - there is no churn.  An index investor is Wall Street's worst nightmare - little opportunity for profit.  Still, now that index investing is popular most all firms offer such funds.  They just tag on a few fractions of a percent in management fees so they can get some profits.  Vanguard is a bit different though - they are owned by the funds themselves.  So any profit that might occur from their extremely low fees goes right back into the funds to lower the fees in the future.  The founder of company has been advocating for individual investors against the exploitation of Wall Street pretty much his whole life.

So if you "do it right" you can own a broad index of equities in companies all through the US or even the world while giving Wall Street almost nothing.  They key is not to confuse the equities market itself with "Wall Street".  You can participate in the equities market (a good thing) while not lining the pockets of Wall Street (a bad thing).

If you are interested on the lowest cost and least "Wall-Street-like" investing plan you might check out Bogleheads (either the site or one of their books).

matchewed

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Re: do not want to invest in stock market
« Reply #30 on: July 19, 2013, 09:50:03 AM »
OK, so I'm back and please bear with me if I sound naive or simplistic.   

I agree with much of the Occupy Wall St protests that the rich, powerful are too rich, powerful.  I also think we should support Main St, not Wall St.  And now I am going to put my money in Wall St by investing in the stock market?

I am convinced:  if you are going to invest in the stock market, then you should invest in the All Stock Index.

I am having trouble with: why should I invest in the stock market at all?  (given what I said above)

My counter question to you is; in what way is investing in the stock market supporting the current regulations (or lack thereof)?

I think it's easy to lump personal investing into the actions of Wall St. and large investment firms such as Goldman Sachs. But trying to lump all that together is an oversimplification at best.

grantmeaname

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Re: do not want to invest in stock market
« Reply #31 on: July 19, 2013, 10:11:18 AM »
OK, so I'm back and please bear with me if I sound naive or simplistic.   

I agree with much of the Occupy Wall St protests that the rich, powerful are too rich, powerful.  I also think we should support Main St, not Wall St.  And now I am going to put my money in Wall St by investing in the stock market?
You're speaking in greatly oversimplified, Manichean caricatures again. PIMCO and American Funds are headquartered in Cali, Vanguard is headquartered in rural Pennsylvania, and Fidelity is headquartered in Boston. What does that have to do with Wall Street?

I get the feeling that you didn't take the opportunity to educate yourself like everyone suggested. If you read up on things and understand them, and have questions about ethics and morality, we'll have great answers. But if all you can say is "some people are rich and powerful and I think that's bad", it's really hard to have a productive conversation with you.

rugorak

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Re: do not want to invest in stock market
« Reply #32 on: July 19, 2013, 10:18:26 AM »
I also think we should support Main St, not Wall St.

While a great slogan/sound bite it really isn't as simple as that. If you take that statement to its logical end you are saying all privately held companies are moral and all publicly held companies are immoral. To me that is wrong. There are many publicly traded companies that are very moral. There are also small privately held companies that are very immoral.  For example in the past there were many cases of small dry cleaning businesses dumping toxic waste illegally potentially poisoning their communities. A small dry cleaning business is main street. On the flip side there are solar energy companies that are on the stock market that are very careful about how they manufacture, etc. that you would consider moral/good. That would be wall street.

You mentioned Occupy Wall Street. What you need to keep in mind is that most were not protesting against the fact that there are stock markets. They were protesting about the rules stacking the deck for those who already have billions and against those like most of us who have less. And that even when the rules aren't stacked against the little guy that people were getting away with breaking the rules with little more than a slap on the wrist.

Another thing is that companies can change over time. What is a great company today could turn shady or plain evil tomorrow. And what is a horrid company today could be turned around and do great things for the world tomorrow. Trying to keep your money invested in just the good companies (and lest not forget profitable companies because otherwise it really isn't much of an investment) would be exhausting and time consuming.

I look at things this way. I think the majority of companies out there are not inherently evil. Most are trying to make money by providing a product and/or service that people want in a way that is beneficial for everyone. Occasionally many will do something people may consider evil. And a select few are almost always evil. But by investing in a total market index you spread your money out so that most of your money goes to the good companies. You accept the fact that a small percentage of your total may go to the bad ones, but in the grand scheme of things it is little. Also this works in your favor financially such that you can do like many have already said in this thread and put your spending and time to things you believe are good. You can volunteer because you don't have to work and have enough money to buy your things at more expensive places To me this is doing the greatest good and the littlest evil which is all any of us can hope to accomplish.

Spork

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Re: do not want to invest in stock market
« Reply #33 on: July 19, 2013, 10:46:28 AM »

I'll throw something else out there...  I've often though investing in a company you have moral issues with (or really any issues with) could actually be a good thing.

I've long thought it could be possible to make changes in a company you disagree with by trying to create a "stockholder's union".  The goal would be to change a policy of the company and still make a profit.  The more stock you have in the union, the stronger the force.

Don't like how Exxon-Mobile operates?  Vote with your dollars ... and your friends' dollars.

dragoncar

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Re: do not want to invest in stock market
« Reply #34 on: July 19, 2013, 10:48:05 AM »
I also think we should support Main St, not Wall St.

While a great slogan/sound bite it really isn't as simple as that. If you take that statement to its logical end you are saying all privately held companies are moral and all publicly held companies are immoral. To me that is wrong. There are many publicly traded companies that are very moral. There are also small privately held companies that are very immoral.  For example in the past there were many cases of small dry cleaning businesses dumping toxic waste illegally potentially poisoning their communities. A small dry cleaning business is main street. On the flip side there are solar energy companies that are on the stock market that are very careful about how they manufacture, etc. that you would consider moral/good. That would be wall street.

You mentioned Occupy Wall Street. What you need to keep in mind is that most were not protesting against the fact that there are stock markets. They were protesting about the rules stacking the deck for those who already have billions and against those like most of us who have less. And that even when the rules aren't stacked against the little guy that people were getting away with breaking the rules with little more than a slap on the wrist.

Another thing is that companies can change over time. What is a great company today could turn shady or plain evil tomorrow. And what is a horrid company today could be turned around and do great things for the world tomorrow. Trying to keep your money invested in just the good companies (and lest not forget profitable companies because otherwise it really isn't much of an investment) would be exhausting and time consuming.

I look at things this way. I think the majority of companies out there are not inherently evil. Most are trying to make money by providing a product and/or service that people want in a way that is beneficial for everyone. Occasionally many will do something people may consider evil. And a select few are almost always evil. But by investing in a total market index you spread your money out so that most of your money goes to the good companies. You accept the fact that a small percentage of your total may go to the bad ones, but in the grand scheme of things it is little. Also this works in your favor financially such that you can do like many have already said in this thread and put your spending and time to things you believe are good. You can volunteer because you don't have to work and have enough money to buy your things at more expensive places To me this is doing the greatest good and the littlest evil which is all any of us can hope to accomplish.

Slogans like those are what I'd expect from a liberal Sara Palin.  Can I ask where the OP gets his/her information?

napalminator

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Re: do not want to invest in stock market
« Reply #35 on: July 19, 2013, 01:35:07 PM »
I don't think (at least, not that I saw) anybody's touched on this yet: saying you don't want to invest in the stock market because it's all big companies like WalMart and they're eeeeeeeeeeeeevil is silly.  Most companies on the stock market don't make the news for "worker treatment" or whatever your complaint is.  Here's a list of companies on the S&P 500. Without using a search engine, can anybody here offer any opinion whatsoever on KLA-Tencor?  Jacobs Engineering?  Omnicom Group?  Praxair?  Get my point?  These are huge companies that nobody outside of their industry cares much about. 

To me, that's enough to toss out the "social justice" rationale for not investing.  If it still bothers you, find a way to invest in sectors that you think are "good" and avoid the "bad" ones.

bUU

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Re: do not want to invest in stock market
« Reply #36 on: July 20, 2013, 02:59:30 AM »
Praxair delivers liquid nitrogen to the factory down the street from me. I don't know anything other than the fact that sometimes the tank is encased in frost 24/7 for months at a time, even in summer. A 30 foot high, 8 foot wide Popsicle. :)

mcneally

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Re: do not want to invest in stock market
« Reply #37 on: July 20, 2013, 09:32:31 AM »
Done at large scale, all "responsible" or "socially conscious" investing does is create better returns for those who are willing to invest in the "bad" companies. It doesn't discourage behavior at all.

bUU

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Re: do not want to invest in stock market
« Reply #38 on: July 20, 2013, 09:45:31 AM »
Done at large scale, all "responsible" or "socially conscious" investing does is create better returns for those who are willing to invest in the "bad" companies. It doesn't discourage behavior at all.
I was just thinking about this on the way to church this morning. I think that can be said for the vast majority of "responsible" or "socially conscious" activity, starting with giving to charities like hunger relief and aid to the homeless.

mpbaker22

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Re: do not want to invest in stock market
« Reply #39 on: July 20, 2013, 10:46:31 AM »
Theoretically you're level of involvement with the evil of the company would be equal to the level of your ability to change the evil.  An earlier poster said something about your $1000 investment not affecting the stock price, so it not being a big deal.  I disagree.  Your $1000 investment affects it to the same proportion as a $1000000 investment.  It also gives you a proportionate amount of control as the $10000000 investment.  If you had $100 billion (or whatever it would cost), you could buy walmart and make them a company according to your ethics.

mcneally

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Re: do not want to invest in stock market
« Reply #40 on: July 20, 2013, 11:25:54 AM »
Done at large scale, all "responsible" or "socially conscious" investing does is create better returns for those who are willing to invest in the "bad" companies. It doesn't discourage behavior at all.
I was just thinking about this on the way to church this morning. I think that can be said for the vast majority of "responsible" or "socially conscious" activity, starting with giving to charities like hunger relief and aid to the homeless.

No. Giving to those charities makes fewer people hungry and homeless (unless you are arguing that by existing those charities are encouraging more people to be poor). Not investing in a "bad" company just means someone else buys the stock cheaper and makes more money, but the activities of the company are unchanged. 

bUU

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Re: do not want to invest in stock market
« Reply #41 on: July 20, 2013, 12:26:03 PM »
Theoretically you're level of involvement with the evil of the company would be equal to the level of your ability to change the evil.
Uh - That's a slippery slope. It leads to stuff like this: http://rationalwiki.org/wiki/Nuremberg_defense

I think efforts to simplify this moral quandary will all fail. This is a complex issue, and there's no way to make it less complex without the loss of nuance invariably leading to an immoral conclusion.


bUU

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Re: do not want to invest in stock market
« Reply #42 on: July 20, 2013, 12:29:37 PM »
(unless you are arguing that by existing those charities are encouraging more people to be poor).
Rather, I believe that such charitable giving could be demotivating society from necessary to steps to change to alleviate much of that hunger and homelessness wholesale. I'm not going to stop giving, but I do worry about the second-order impact, the more I see it used as an excuse for not taking broader action.
« Last Edit: July 20, 2013, 12:31:13 PM by bUU »

mpbaker22

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Re: do not want to invest in stock market
« Reply #43 on: July 20, 2013, 10:21:51 PM »
Theoretically you're level of involvement with the evil of the company would be equal to the level of your ability to change the evil.
Uh - That's a slippery slope. It leads to stuff like this: http://rationalwiki.org/wiki/Nuremberg_defense

I think efforts to simplify this moral quandary will all fail. This is a complex issue, and there's no way to make it less complex without the loss of nuance invariably leading to an immoral conclusion.

I'm sorry, were we disagreeing with something?  My post was disagreeing with the person who said that buying shares wasn't even because your $1000 (my made up number) wouldn't have an actual impact on the stock price.  I was showing the impact would be in proportion to the dollar amount compared to a $100 Billion dollar investment, but that the investor would still be somewhat culpable for the actions of the company.

That is to also say, if you buy stock and use it as a leverage tool to change the company's practices, are you not actually doing more good than if you had not invested at all, even if that good doesn't bring about real change?
« Last Edit: July 20, 2013, 10:24:03 PM by mpbaker22 »

bUU

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Re: do not want to invest in stock market
« Reply #44 on: July 21, 2013, 05:09:10 AM »
Theoretically you're level of involvement with the evil of the company would be equal to the level of your ability to change the evil.
Uh - That's a slippery slope. It leads to stuff like this: http://rationalwiki.org/wiki/Nuremberg_defense

I think efforts to simplify this moral quandary will all fail. This is a complex issue, and there's no way to make it less complex without the loss of nuance invariably leading to an immoral conclusion.

I'm sorry, were we disagreeing with something?
No; not specifically. I was making a comment, building on what you wrote about culpability for "evil" that one contributes to, i.e, that there is a danger and therefore a limit to the extent that statement you made holds water.

That is to also say, if you buy stock and use it as a leverage tool to change the company's practices, are you not actually doing more good than if you had not invested at all, even if that good doesn't bring about real change?
Sounds reasonable to me, same as a military officer in a corrupt regime aiming to use that position as a platform to try to bring down the corrupt regime. Becoming an activist investor specifically for the purpose of changing the business' social conscience is an interesting approach.

That reminded me of an article I read recently. Here's an excerpt:
Quote
People for the Ethical Treatment of Animals has been buying shares for seven years and now owns a piece of at least 80 companies, including McDonald's and Kraft Foods. It hopes to influence their animal welfare policies on such things as how chickens are slaughtered or buying pork from suppliers that keep pregnant sows in small crates. By buying stock, PETA is guaranteed the right to present its ideas directly to officials and other shareholders, many of whom would otherwise would likely pay little attention to the group.
http://www.huffingtonpost.com/2010/05/24/peta-stock-animalrights-g_n_586991.html
« Last Edit: July 21, 2013, 05:11:52 AM by bUU »

hoodedfalcon

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Re: do not want to invest in stock market
« Reply #45 on: July 21, 2013, 07:11:45 AM »

That is to also say, if you buy stock and use it as a leverage tool to change the company's practices, are you not actually doing more good than if you had not invested at all, even if that good doesn't bring about real change?
Sounds reasonable to me, same as a military officer in a corrupt regime aiming to use that position as a platform to try to bring down the corrupt regime. Becoming an activist investor specifically for the purpose of changing the business' social conscience is an interesting approach.

That reminded me of an article I read recently. Here's an excerpt:
Quote
People for the Ethical Treatment of Animals has been buying shares for seven years and now owns a piece of at least 80 companies, including McDonald's and Kraft Foods. It hopes to influence their animal welfare policies on such things as how chickens are slaughtered or buying pork from suppliers that keep pregnant sows in small crates. By buying stock, PETA is guaranteed the right to present its ideas directly to officials and other shareholders, many of whom would otherwise would likely pay little attention to the group.
http://www.huffingtonpost.com/2010/05/24/peta-stock-animalrights-g_n_586991.html

I know a guy who is a "shareholder activist" for his job, very similar to what PETA is doing. He has been quite successful in changing policies and practices with a number of large corporations. How is that for a dream job?

Crash87

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Re: do not want to invest in stock market
« Reply #46 on: July 21, 2013, 08:02:06 AM »
Why not invest in whatever way you think will give you the greatest return and give a portion of the proceeds to charity?

mgreczyn

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Re: do not want to invest in stock market
« Reply #47 on: July 22, 2013, 03:35:58 PM »
OK, so I'm back and please bear with me if I sound naive or simplistic.   

I agree with much of the Occupy Wall St protests that the rich, powerful are too rich, powerful.  I also think we should support Main St, not Wall St.  And now I am going to put my money in Wall St by investing in the stock market?

I am convinced:  if you are going to invest in the stock market, then you should invest in the All Stock Index.

I am having trouble with: why should I invest in the stock market at all?  (given what I said above)
I want to just make a small correction.  By buying a stock through a discount brokerage, you are not putting any money into wall street.  Wall street makes their money by brokering large transactions, such as IPOs and debt placements.  Stock markets like the NASDAQ and the NYSE are secondary markets, much like a used car dealership vs a Ford or Chevy dealership.  Say you go to Bob's Used Cars and buy a Ford.  Ford gets nothing.  Bob gets a cut.  Wall Street in this analogy would be like Bob's parents.  They get nothing, unless Bob owes them money in which case now he can pay them back a little because you bought a car.  Same thing if you have a Vanguard brokerage account and you buy some Whole Foods.  Whole Foods gets nothing.  Vanguard gets $7 commission or something (and Vanguard is hardly Wall Street).  Wall Street doesn't get a dime.  (edit - the exchanges also get a fee from Vanguard for the privilege of buying that stock on your behalf.  Maybe this is "putting money into Wall St., but an Exchange is very distinct from the banks that most think of when they think of Wall Street). Now say you bought some Whole Foods back when they made their IPO.  You're supporting the stock price by creating demand, which in turn boosts the underwriting fee for whatever wall street company backs the deal, so there you could be said to indirectly put money into wall st. 

I think whether you want to invest in the stock market or not is a very valid question.  Not everyone does.  You may not want to invest in the stock market, but I would argue that the alternatives will be more difficult to find / invest in / manage.  Let's assume that you want to own equity in business interests as part of a basic diversification strategy.  Financial management doctrine pre-dating the current stock market and advanced economies in general holds that you should diversify your wealth between cash, business interests (equity) and real estate.  These days you can also invest in debt (i.e. bonds).  Assuming that you want to invest in businesses, and taking your desire to invest in main street into account, you might decide to go invest in a local business.  However, you might find it difficult, as the owner may not want to sell, or if they do, they may only be interested in selling 100% of their business.  Assuming you can afford to buy their business, you then have to ask yourself if you really want to ditch your current gig and go operate that business.   Maybe you can find an owner willing to sell you, say 1,000th of their business for $1,000.  What are the management duties?  Do you have any say in how the business is run?  Do you get paid a dividend, or do you have to wait until the owner sells in order to realize a gain?  What happens if the business fails?  What happens if the business gets sued? If you buy a stock, all of these questions are answered for you in fairly standard formats.

One of the advantages of the stock market, and one of the reasons it has been such a fantastic wealth creation machine (in spite of Wall Street I might add, rather than because of it) is that it allows normal people with normal amounts of money to take an equity stake in a profitable business and not be a day-to-day operator of that business.  There may be another option soon: you might soon be able to invest in businesses through crowdfunding, but I'm not sure whether that will be an ownership i.e. equity investment or a debt investment.  You could also start your own Main Street business and let that be your main investment in business equity, though it will also probably be an all-consuming job.

You might decide you want to avoid taking an equity stake in a business for these reasons, however business equity is one of the only ways you can outrun inflation in the long run, and is generally considered a cornerstone of wealth creation.  However, what will you invest in?  You can invest in bonds, but there you are still investing for the most part in corporate America.  You could limit your investment to government bonds.  You could keep your money in cash, in which case you will become acquainted with one of the only guarantees in the investing world: staying in cash is a sure way to destroy wealth.  You could pay down your own mortgage.  But then you still need the income from your job.  You could rely solely on government bonds and a low cost of living, but it will take you a lot longer than it will if you invest in the stock market.
« Last Edit: July 22, 2013, 03:38:25 PM by mgreczyn »

Gizbar

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Re: do not want to invest in stock market
« Reply #48 on: July 22, 2013, 03:57:13 PM »
I skimmed this thread pretty fast, so please excuse me if this has been mentioned:

If you do end up avoiding the stock market (I don't, but I have friends that do), you could invest in straightforward real estate.  That is, buy a house and rent it out.  Lots of research must be done, you'll need to get good at picking renters, and you'll have to do more work than you would with the stock market, but it will avoid any ethical concerns associated with the stock market (though I'm not saying there are any).

Why instead of municipal bonds?  You often make way higher return on investment.  Where I am I might get 2% on those bonds?  Real estate (I hear) is usually quite a high ROI (6-8%?), or at least by comparison.

Dicey

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Re: do not want to invest in stock market
« Reply #49 on: July 23, 2013, 07:37:00 AM »
Wow! I'm just returning from a MMM Forum hiatus. In the interim, I occasionally browsed Yahoo Finance. What a shit-ton of difference! There are so many interesting and well-thought out responses here! I feel like I've just woken up from a long winter's nap. You guys are awesome!