Author Topic: Ethical implications of index fund investing  (Read 106568 times)

liberteEgalite

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Ethical implications of index fund investing
« on: January 15, 2017, 04:56:28 AM »
Here, http://www.mrmoneymustache.com/2016/11/24/efficiency-is-the-highest-form-of-beauty/

MMM encourages Mustachians to wield their influence to craft a world that's better for all.

In my view, investing in an index fund does not do that. Dollars are like votes. Dollars in an index fund are a vote for the status quo. Dollars in an index fund tell the market, "Keep the allocation the same. Keep at it, BoA, JP Morgan, FB, fast food, and auto industry! Crank out more crummy auto loans. Keep deluding people and messing with their psychology so they'll buy more stuff. I vote for people to be fatter, sicker, and hate their jobs more, even while feeling more trapped in them. Anti-depressant profits, go ye up! Tax-dodging corporations, here's a ten-spot. Add to your army of lawyers and accountants to work those tax loopholes even harder this year!"

Has anyone grappled with this philosophical/ethical issue? Am I missing something? I'm interested in hearing from folks who have found investment approaches that exert a Mustachian influence on the community or the world. How can we steer capital in directions that qualify as constructive to the Mustachian mind? "Locavesting" by Amy Cortese, is interesting, yet how does a person manage risk / diversify a portfolio that includes local investments?

frugledoc

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Re: Ethical implications of index fund investing
« Reply #1 on: January 15, 2017, 05:09:34 AM »
Here, http://www.mrmoneymustache.com/2016/11/24/efficiency-is-the-highest-form-of-beauty/

MMM encourages Mustachians to wield their influence to craft a world that's better for all.

In my view, investing in an index fund does not do that. Dollars are like votes. Dollars in an index fund are a vote for the status quo. Dollars in an index fund tell the market, "Keep the allocation the same. Keep at it, BoA, JP Morgan, FB, fast food, and auto industry! Crank out more crummy auto loans. Keep deluding people and messing with their psychology so they'll buy more stuff. I vote for people to be fatter, sicker, and hate their jobs more, even while feeling more trapped in them. Anti-depressant profits, go ye up! Tax-dodging corporations, here's a ten-spot. Add to your army of lawyers and accountants to work those tax loopholes even harder this year!"

Has anyone grappled with this philosophical/ethical issue? Am I missing something? I'm interested in hearing from folks who have found investment approaches that exert a Mustachian influence on the community or the world. How can we steer capital in directions that qualify as constructive to the Mustachian mind? "Locavesting" by Amy Cortese, is interesting, yet how does a person manage risk / diversify a portfolio that includes local investments?

Corporations don't dodge tax.  They pay the exact lowest correct amount of tax that their government legally makes them.  It is up to goverments to change corporation tax rules if they want corporations to pay more tax.  Funny how it doesn't seem to happen.


Indexer

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Re: Ethical implications of index fund investing
« Reply #2 on: January 15, 2017, 05:37:16 AM »
Don't try to be socially responsible with your investing. Be diversified with your investing. Be socially responsible with your consumption.



Here is why. Most socially responsible funds avoid oil and SIN(alcohol, tobacco, etc.) industries. They will still normally have Apple(slave labor working conditions), banks, car manufacturers, Wal-Mart, drug companies, etc. Taken to the extreme, avoiding anything you disagree with, and you will own a handful of individual stocks in really responsible companies. You can find an argument for removing many companies. Sure you are doing it to be socially responsible, but the end result is that your portfolio is getting more customized, just like an active portfolio that tries to remove the losers. End result: less diversification, higher costs.

Also keep in mind that buying these stocks isn't encouraging this behavior, it is profiting off the behavior. If you bought an IPO you could argue you are encouraging what they do. When you buy shares of Exxon the money doesn't go to Exxon. They had their IPO a long time ago. You are buying existing ownership of Exxon from someone else. Exxon makes money, they pay you dividends.

The way I look at it: Exxon is destroying the environment, and I have very little control over that other than using less gas myself. Avoiding their stock would have zero impact on them, but it would make me less diversified. To me, any dividends I get from Exxon are reparations for the damage they are doing to my environment.

jjandjab

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Re: Ethical implications of index fund investing
« Reply #3 on: January 15, 2017, 06:41:10 AM »
Don't try to be socially responsible with your investing. Be diversified with your investing. Be socially responsible with your consumption.

When you buy shares of Exxon the money doesn't go to Exxon. They had their IPO a long time ago. You are buying existing ownership of Exxon from someone else. Exxon makes money, they pay you dividends.

The way I look at it: Exxon is destroying the environment, and I have very little control over that other than using less gas myself. Avoiding their stock would have zero impact on them, but it would make me less diversified. To me, any dividends I get from Exxon are reparations for the damage they are doing to my environment.

+1. And to build on the depth of the argument: When one starts to think about where they could/should draw the line in terms of their investing, it is either arbitrary or a near impossible task. You could dig all the way to the base. One could say, well the NYSE and NASDAQ and other exchanges are profiting from hosting companies that are not socially responsible, handling their trades. Maybe these companies have computer server farms that use utility companies that use coal for electricity. So if you can't use the exchanges, you can't even invest in "socially responsible" funds or single companies.

As Indexer points out, owning some of a company's stock on a small scale does nothing to either help or hurt their company or upper management. Government policies help or hurt them. Making consumption choices about whether to use the products they are selling can help or hurt them. Companies can go private and still make a fortune and ruin the environment. 
« Last Edit: January 15, 2017, 07:12:07 AM by jjandjab »

BTDretire

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Re: Ethical implications of index fund investing
« Reply #4 on: January 15, 2017, 07:01:04 AM »
Here, http://www.mrmoneymustache.com/2016/11/24/efficiency-is-the-highest-form-of-beauty/

MMM encourages Mustachians to wield their influence to craft a world that's better for all.

In my view, investing in an index fund does not do that. Dollars are like votes. Dollars in an index fund are a vote for the status quo. Dollars in an index fund tell the market, "Keep the allocation the same. Keep at it, BoA, JP Morgan, FB, fast food, and auto industry! Crank out more crummy auto loans. Keep deluding people and messing with their psychology so they'll buy more stuff. I vote for people to be fatter, sicker, and hate their jobs more, even while feeling more trapped in them. Anti-depressant profits, go ye up! Tax-dodging corporations, here's a ten-spot. Add to your army of lawyers and accountants to work those tax loopholes even harder this year!"

Has anyone grappled with this philosophical/ethical issue? Am I missing something? I'm interested in hearing from folks who have found investment approaches that exert a Mustachian influence on the community or the world. How can we steer capital in directions that qualify as constructive to the Mustachian mind? "Locavesting" by Amy Cortese, is interesting, yet how does a person manage risk / diversify a portfolio that includes local investments?

Corporations don't dodge tax.  They pay the exact lowest correct amount of tax that their government legally makes them.  It is up to goverments to change corporation tax rules if they want corporations to pay more tax.  Funny how it doesn't seem to happen.

 To add to that, corporations don't pay taxes, they build them into the fees they charge their customers.

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #5 on: January 15, 2017, 07:12:38 AM »
Quote
Also keep in mind that buying these stocks isn't encouraging this behavior, it is profiting off the behavior.

I'm not willing to profit from misbehavior. I'm not willing to be a part-owner of enterprises that are profiting through misbehavior.

Companies do care about their stock price. I can imagine a world where investors don't put up with BS, which would keep executives on their toes.

Quote
To me, any dividends I get from Exxon are reparations for the damage they are doing to my environment.

To Exxon, maybe they're kickbacks that implicate you as an accomplice? You know that in any sort of congressional hearing or confrontation with the EPA, Exxon speaks in your name: "We're just doing what we have to do to provide shareholder value."

(Should it bug you that non-owners don't get reparations? What do future generations get? Just musing out loud; not really trying to attack you.)

I'm thinking beyond traditional equities. Low-touch businesses? Bike lane bonds? (Ha ha.) A way to invest in local small farms (as one part of a balanced investment programme)? I don't succor maintaining rental real estate, but maybe that's a smart path? Should I create a fund for people like me (who are willing to sacrifice both returns and diversification for the privilege of investing solely in Mustache-lifestyle-compatible projects)? To jjandjab's point, this fund could operate on a novel platform?

I'll grant frugledoc's point, and Qmavam's, though it doesn't make me feel any better to see these companies benefiting massively from infrastructure we taxpayers buy and maintain. The situation gets awful murky when you figure in companies hiring lobbyists to create and maintain loopholes for their own benefit.

DavidAnnArbor

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Re: Ethical implications of index fund investing
« Reply #6 on: January 15, 2017, 07:36:23 AM »
I'm sympathetic with your concerns, so a lot of mustachians invest in real estate and become landlords. This enables you to invest locally, not support these corporations, and still accumulate wealth and income.

BTDretire

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Re: Ethical implications of index fund investing
« Reply #7 on: January 15, 2017, 08:09:33 AM »
I'm sympathetic with your concerns, so a lot of mustachians invest in real estate and become landlords. This enables you to invest locally, not support these corporations, and still accumulate wealth and income.

LOL, you would have no problem finding as many negatives about landlords* as you do about oil companies.
 How are you going to replace a roof without an oil or steel company, pour any concrete without adding to the carbon footprint.
And certainly don't drive to your property to pickup a late check.

* been a landlord, hardest decision was keeping the deposit of a tenant
after they had to move because the husband had a stroke and couldn't work anymore.
 It wasn't enough to cover my losses.

Mezzie

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Re: Ethical implications of index fund investing
« Reply #8 on: January 15, 2017, 08:48:24 AM »
I try to assuage my guilt by having my fun speculative account* invested entirely in things I believe in. It's actually been fairly profitable lately, but it isn't very diverse, so I expect that will change. In my index funds, I feel a distance from the individual stocks since I'm really investing in the market as a whole rather than any one company, but I do still get that twinge of guilt you mention. It's actually why I no longer have a rewards credit card; the company I had mine from was investing in evil things. In retrospect, having them give me some cash back would have been a great way for me to invest in non-evil things and attempt a balance, but at the time, I was so disgusted I cancelled my card on the spot.

I also work full time in a profession that does good, am active politically, donate to charities and non-profits that do good, and try my best to purchase goods and services responsibly.

*if I don't have a little money to play with in the market, I'll make bad, bad decisions with my main investments because I find investing in specific companies, particularly renewable energy ones, fun. I buy and hold still in my tiny play account, but I buy only what I think is good for the world.

Radagast

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Re: Ethical implications of index fund investing
« Reply #9 on: January 15, 2017, 11:45:30 AM »
I actually have kind of the opposite view. Stock represents ownership of a company. If all the ethical owners leave, then unethical ownership will be the result. Better to buy and make your voice heard.

seattlecyclone

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Re: Ethical implications of index fund investing
« Reply #10 on: January 15, 2017, 11:51:04 AM »
Beyond the fact that the decision to buy a company's stock on the secondary market (or not) has no effect whatsoever on their business, where do you draw the line?

Oil, gas, and coal companies dig fossil fuels out of the ground, but they only do it because every other corporation in the world relies on that fuel to get their products to market. If you're going to draw a line in the sand and say you are not willing to profit from fossil fuels, you'll find that there are precious few things you can invest in.

Indexer

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Re: Ethical implications of index fund investing
« Reply #11 on: January 15, 2017, 08:24:55 PM »
Companies do care about their stock price. I can imagine a world where investors don't put up with BS, which would keep executives on their toes.

Companies care. However, you have no impact on that stock price. 1. If you bought an index fund like VTSAX then a very tiny amount of money goes to each company. 2. Even if your contribution did move the needle it still doesn't matter. If you didn't buy it then the stock would be at a value and someone else would buy it. Markets are efficient like that. 3. Ignore the first two. Even if you not buying the stock would impact Exxon that won't encourage them to change their ways because earning more is still what the other investors care about.

Here is how you can impact Exxon's business, impact their EARNINGS! Your consumption is going to impact them more than which index fund you buy.

Quote
(Should it bug you that non-owners don't get reparations? What do future generations get? Just musing out loud; not really trying to attack you.)

Whether you were attacking me wouldn't bother me anyway. ;-)  My goal is the most efficient long term portfolio. That includes Exxon. It is very logical, not emotional. If you choose to do something else that is on you. I know it isn't literally reparations, but if I ever get this little itch I want to scratch I just remind myself why I'm going to have it in the portfolio anyway. We live in a world where there is gasoline. I hope one day we don't. I know whether I buy Exxon stock will have ZERO impact on that. Whether I drive more efficiently, buy an electric car in the future, etc... those things will have an impact. I'm going to drive change the way I can and leave my portfolio alone.

ChpBstrd

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Re: Ethical implications of index fund investing
« Reply #12 on: January 15, 2017, 09:24:21 PM »
Several issues are packed in here:

First, does your ownership in the company cause more of the company's abuses? For small investors, the answer is an unequivocal no. Even if all small investors boycotted a company's stock at one instant, and it briefly fell 5% as a result of low liquidity, some bargain hunting hedge fund computer program would erase that irregularity in a millisecond - and make millions doing so. Conflicts of interest are real, though. If, for example, your investments in oil take away your enthusiasm as an environmental activist, a real impact has occurred (one activist was demotivated). Buying the whole index is the right choice because it improves your returns compared to stock-picking, reduces risk, and doesn't mean you endorse any particular thing. As another poster pointed out, unless you're buying during an IPO, you're trading with other investors, not sending cash to the company.

Second, do our investments in general rely upon an economy that only grows because people respond to marketing, consume more than they need, spend all they earn, and neglect their health and environment? If everyone became Mustachian overnight, most businesses in most strip malls would go bankrupt. New cars would be hard to sell. The restaurant, luxury, fashion, electronics, retail, and oil industries would collapse. We savers profit because the spenders fail to do the right things for themselves, their families, and their communities. Our shares in Ford are propped up by the sale of SUVs and luxury fake work trucks we would never buy. Our shares in YUM brands are for a business that sells bad health on a plate. Our shares in VISA return a profit to us because others are financially profligate (or illiterate). And every index fund has some tobacco in it.

Retirement was nearly impossible in the days before public investment markets. We are fortunate to have the options we do. Yet, much of the bounty of our economic harvest does come at somebody's expense. People make bad decisions, trade their labor for useless things, and harm their own health. The bright side is these transactions fund other people's retirements. The moral dilemma is how to give people freedom (e.g. to buy things) without being responsible for their bad decisions (e.g. to buy things). Choosing not to participate in financial markets would not change the economy, or make people use their freedom more intelligently. Buy VTI and find some other path that would lead to change.

the_fella

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Re: Ethical implications of index fund investing
« Reply #13 on: January 15, 2017, 09:32:04 PM »
It may sound cold, but my investment strategy is to go with whatever is legal that makes the highest return possible. Fuck ethics. But that's just my $0.02.

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #14 on: January 15, 2017, 09:46:07 PM »
...
Retirement was nearly impossible in the days before public investment markets. We are fortunate to have the options we do. Yet, much of the bounty of our economic harvest does come at somebody's expense. People make bad decisions, trade their labor for useless things, and harm their own health. The bright side is these transactions fund other people's retirements. The moral dilemma is how to give people freedom (e.g. to buy things) without being responsible for their bad decisions (e.g. to buy things). Choosing not to participate in financial markets would not change the economy, or make people use their freedom more intelligently. Buy VTI and find some other path that would lead to change.

ChpBstrd, thanks for the thoughtful overview. I feel as torn as ever: I'd rather wash my hands of this system that breeds discontent and destruction, even if it means NOT retiring. On the other hand, commenters seem to be saying that disgusting as the market is, it's money's "natural habitat," the place where it thrives and reproduces.

Can money be "redeemed"? I would like to think the money that cycles through my hands will be funneled to energize productive, constructive endeavors. Should I value efficiency over that ideal?

ChpBstrd

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Re: Ethical implications of index fund investing
« Reply #15 on: January 15, 2017, 10:24:57 PM »
...
Retirement was nearly impossible in the days before public investment markets. We are fortunate to have the options we do. Yet, much of the bounty of our economic harvest does come at somebody's expense. People make bad decisions, trade their labor for useless things, and harm their own health. The bright side is these transactions fund other people's retirements. The moral dilemma is how to give people freedom (e.g. to buy things) without being responsible for their bad decisions (e.g. to buy things). Choosing not to participate in financial markets would not change the economy, or make people use their freedom more intelligently. Buy VTI and find some other path that would lead to change.

ChpBstrd, thanks for the thoughtful overview. I feel as torn as ever: I'd rather wash my hands of this system that breeds discontent and destruction, even if it means NOT retiring. On the other hand, commenters seem to be saying that disgusting as the market is, it's money's "natural habitat," the place where it thrives and reproduces.

Can money be "redeemed"? I would like to think the money that cycles through my hands will be funneled to energize productive, constructive endeavors. Should I value efficiency over that ideal?

Probably the best way to do that would be to live a super-eco-frugal-responsible lifestyle, become a multi-millionaire by claiming some of the economy's returns through investments, and then directing those dollars to fund something positive, like a scholarship, a nature preserve, a charity, or an endowment. In that case, the outcome of your behavior would be that a chunk of the economy's returns got directed to that positive thing, rather than being spent on some rich investor's wasteful luxury or status symbol. Your life's work would essentially be the hijacking of a chunk of money from where it otherwise would have naturally flowed.

Metric Mouse

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Re: Ethical implications of index fund investing
« Reply #16 on: January 15, 2017, 10:40:22 PM »
Probably the best way to do that would be to live a super-eco-frugal-responsible lifestyle, become a multi-millionaire by claiming some of the economy's returns through investments, and then directing those dollars to fund something positive, like a scholarship, a nature preserve, a charity, or an endowment. In that case, the outcome of your behavior would be that a chunk of the economy's returns got directed to that positive thing, rather than being spent on some rich investor's wasteful luxury or status symbol. Your life's work would essentially be the hijacking of a chunk of money from where it otherwise would have naturally flowed.

Wow... fantastic point.

Indexer

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Re: Ethical implications of index fund investing
« Reply #17 on: January 16, 2017, 07:26:47 AM »
ChpBstrd, thanks for the thoughtful overview. I feel as torn as ever: I'd rather wash my hands of this system that breeds discontent and destruction, even if it means NOT retiring. On the other hand, commenters seem to be saying that disgusting as the market is, it's money's "natural habitat," the place where it thrives and reproduces.

Can money be "redeemed"? I would like to think the money that cycles through my hands will be funneled to energize productive, constructive endeavors. Should I value efficiency over that ideal?

If you feel that strongly about it then most stocks probably aren't for you, and neither are index funds. You might not even like socially responsible index funds. There are a few green companies you might feel comfortable with, but it will be hard to build a diversified portfolio that way. Tesla, a solar company, some regional banks, etc. You might have to just pick some individual stocks, and for bonds you might need to focus on state/local bonds for designated projects. Example: hospital bonds. As noted, you can also invest in real estate.

Social index fund example: https://personal.vanguard.com/us/funds/snapshot?FundId=0213&FundIntExt=INT
Top holdings include: Apple, JP Morgan, Bank of America, Wells Fargo, Johnson and Johnson, Proctor and Gamble, Pfizer, etc.

Note, that is not diversified and it will likely cost you more than an index fund. If the alternative is not investing at all it should be an improvement.

My advice from earlier still stands, I would just bite the bullet and stick with index funds. If you can't do that then picking stocks you are comfortable with might be your best remaining option.
« Last Edit: January 16, 2017, 07:32:08 AM by Indexer »

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #18 on: January 16, 2017, 08:50:42 AM »

Probably the best way to do that would be to live a super-eco-frugal-responsible lifestyle, become a multi-millionaire by claiming some of the economy's returns through investments ...

It is the second part I don't understand, so I truly appreciate your comments.

Based on your previous comments, I am adapting my understanding of what the market is.
I follow you that buying shares does not capitalize companies (except in an IPO). Could I think of an IPO as the birth of a new "currency"? Existing shares circulate, being bought and sold; sometimes share owners get dividends (yield?), and in other cases owners just hope the value of their shares go up (growth?)

To switch analogies, if the market's a horse race, an index fund is like betting on all the horses, and betting that they collectively go faster every year? (And not just that the companies make a profit, but that profits GROW every year?)

A) That doesn't sound good for the horses. Meaning, it seems like you're asking for trouble/breakage if you're pressuring horses/companies to go faster and faster each year. Although tech has provided efficiency gains, people's jobs seem to suck more and more as quotas go up, costs get cut, etc.

B) What are the reasons for thinking the market will continue to perform? The twentieth century saw a huge expansion in participation in the market, with the advent of IRAs to keep money pouring in. Won't we reach the limits of expanding participation? Wages are stagnant? Will Boomers withdraw money to fund retirement? Maybe that doesn't matter because "the global pool of money" keeps pouring into US equities?

And what's with the Fed propping up the markets?
http://www.forbes.com/sites/investor/2013/01/30/how-the-fed-is-helping-to-rig-the-stock-market/#29f75f362388

I appreciate your help so far, and any further de-bugging of my understanding.

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #19 on: January 16, 2017, 08:53:55 AM »
I actually have kind of the opposite view. Stock represents ownership of a company. If all the ethical owners leave, then unethical ownership will be the result. Better to buy and make your voice heard.

Thanks, Radagast. This is a powerful thought. What are the ways to make one's voice heard? Surely one can't voice an opinion on goings on at all 2,600+ companies represented in an index fund?

seattlecyclone

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Re: Ethical implications of index fund investing
« Reply #20 on: January 16, 2017, 10:24:19 AM »
I actually have kind of the opposite view. Stock represents ownership of a company. If all the ethical owners leave, then unethical ownership will be the result. Better to buy and make your voice heard.

Thanks, Radagast. This is a powerful thought. What are the ways to make one's voice heard? Surely one can't voice an opinion on goings on at all 2,600+ companies represented in an index fund?

Shareholder voting is one way. Corporations must hold an annual meeting to elect the board of directors and vote on other proposals submitted by shareholders. ExxonMobil, as just one example, had proposals last year to nominate a director with environmental expertise, prepare an annual report on the risks that climate change policy might pose to the business, and a few other things. These proposals are always fighting an uphill battle because the board of directors almost always advises votes against these proposals (on the theory that if they thought it was a good idea, they would already have done it). Mutual funds tend to vote with the board on most matters (for example, see Vanguard's policy on this here and a complete report of how each fund voted on each matter here). VTSAX only voted against ExxonMobil's board on one proposal: to expand the right of shareholders to submit alternative candidates for the board of directors. Even so, the proposal for an annual report on climate change risk to the business got 38% of the vote last year, and the environmentalist director proposal got 21%. This is the sort of area where if you and other like-minded people buy some shares in these companies and start attending the annual meetings to speak with the big investors who go there, maybe you could effect some change. It's hard and it will take a while, but shareholders do have rights in this area.

On that note, I do wish that Vanguard or another company could start an index fund that delegates shareholder voting rights to its own shareholders. It wouldn't be that hard to build a voting mechanism into the website to allow fund owners to input their preferences for any matters on which they have an opinion, and the fund would then vote the way its owners do. I'd be willing to pay an extra basis point or two for the privilege.

Mr. Boh

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Re: Ethical implications of index fund investing
« Reply #21 on: January 16, 2017, 10:25:53 AM »
I actually have kind of the opposite view. Stock represents ownership of a company. If all the ethical owners leave, then unethical ownership will be the result. Better to buy and make your voice heard.

I'm sorry but this just doesn't hold up to reason. Maybe you could explain why your "ethical " ownership of an index is any different than my "unethical" ownership of the same index. To me they are exactly the same in that the dollar amount of ownership in any given company within the index doesn't amount to a hill of beans to that company.

The only way this has any relevance is if you are a major share holder who is agitating for change on some ethical grounds. We're talking billions of dollars of shares for the companies listed so far. Think of activist investors like Ichan or Ackman. It takes a lot of money and a lot of effort, not to mention board seats to make a major corporation change. Off the top of my head I cant think of any activist investor pushing for change for some moral reason.

To me investing in the stock market is kind of a deal with the devil. It's probably the best thing to do for me and my family but it's not all sugar and spice and everything nice. On the other hand it keeps me from having to work for an unethical company which is where I would draw the line.

Great thread BTW.

ChpBstrd

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Re: Ethical implications of index fund investing
« Reply #22 on: January 16, 2017, 10:48:13 AM »

Probably the best way to do that would be to live a super-eco-frugal-responsible lifestyle, become a multi-millionaire by claiming some of the economy's returns through investments ...

It is the second part I don't understand, so I truly appreciate your comments.

Based on your previous comments, I am adapting my understanding of what the market is.
I follow you that buying shares does not capitalize companies (except in an IPO). Could I think of an IPO as the birth of a new "currency"? Existing shares circulate, being bought and sold; sometimes share owners get dividends (yield?), and in other cases owners just hope the value of their shares go up (growth?)

To switch analogies, if the market's a horse race, an index fund is like betting on all the horses, and betting that they collectively go faster every year? (And not just that the companies make a profit, but that profits GROW every year?)

A) That doesn't sound good for the horses. Meaning, it seems like you're asking for trouble/breakage if you're pressuring horses/companies to go faster and faster each year. Although tech has provided efficiency gains, people's jobs seem to suck more and more as quotas go up, costs get cut, etc.

B) What are the reasons for thinking the market will continue to perform? The twentieth century saw a huge expansion in participation in the market, with the advent of IRAs to keep money pouring in. Won't we reach the limits of expanding participation? Wages are stagnant? Will Boomers withdraw money to fund retirement? Maybe that doesn't matter because "the global pool of money" keeps pouring into US equities?

And what's with the Fed propping up the markets?
http://www.forbes.com/sites/investor/2013/01/30/how-the-fed-is-helping-to-rig-the-stock-market/#29f75f362388

I appreciate your help so far, and any further de-bugging of my understanding.

A) I once worked payroll at a company where quite a few salespeople - some with high school educations - worked 60 hour weeks but earned six-figure annual commissions in return for hitting their quotas. These "horses" drove BMWs. Other salespeople barely made a living doing the same thing, and many of these were on their way to quitting. Folks with set salaries may not be able to relate to this kind of piecemeal pay scale, but they too are selling their efforts for a price. Employers try to get more labor for their dollars and employees try to sell less labor for their salaries. It's a haggle in the marketplace that is as old as civilization itself. Nothing new there.

B) One basic reason earnings will grow is inflation. If a company can earn a 10% margin now, e.g. earn $1.10 by spending $1, how much can they earn when both of those numbers increase - lets say by 20% over 5 years to keep the math easy? Earnings become $1.32 on spending of $1.20. Profits "grew" 20% from $0.10 to $0.12 just because of inflation. Investors receiving those profits maintained their purchasing power instead of losing it, despite investing in a company that failed to grow sales or margins.

More importantly, the economy grows as population increases. Every 1% increase represents millions of new workers and consumers. Immigrants entering the economy - coming from places where govt policies prevent them from selling their labor productively - are a net gain to the world economy.

Billions of people living in poverty will rise out of poverty as soon as their governments enable it. That has been slowly happening for many decades. Look at the growth of India, China, and Latin America.

Also, it's not only tech that improves productivity. Different firms with different strategies, organizational forms, assumptions, and behaviors compete for fitness in an evolutionary jungle. There is also competition for better ideas within firms. Old ideas are replaced by new. The modern corporation is completely different than what existed - and was out-competed - decades ago. Many losers of this struggle have disappeared in bankruptcies and buyouts.

Lastly, a fundamental assumption of economics is that people are unsatisfiable. Those with plenty of earnings and stuff will strive for more earnings and stuff. People are selling their 40" TVs on Craigslist to buy 60" TVs. Our SUVs now have voice control and motorized gate lifts. Even mustachians want to buy back their time rather than goods/services. "Enough" won't be a problem any time soon.

Cwadda

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Re: Ethical implications of index fund investing
« Reply #23 on: January 16, 2017, 10:59:45 AM »
Quote
Probably the best way to do that would be to live a super-eco-frugal-responsible lifestyle, become a multi-millionaire by claiming some of the economy's returns through investments, and then directing those dollars to fund something positive, like a scholarship, a nature preserve, a charity, or an endowment. In that case, the outcome of your behavior would be that a chunk of the economy's returns got directed to that positive thing, rather than being spent on some rich investor's wasteful luxury or status symbol. Your life's work would essentially be the hijacking of a chunk of money from where it otherwise would have naturally flowed.
ChpBstrd nailed it here. There's nothing else you can do.

It's moneyed interests that keep the tax code complex deliberately, allowing corporations to line their pockets while minimum wage workers don't file their taxes because it's so ****ing complex for the average person. The ones who need the tax refund most. It's quite appalling, and it's not going to change. This is how the government operates.

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #24 on: January 16, 2017, 12:12:18 PM »

To me investing in the stock market is kind of a deal with the devil. It's probably the best thing to do for me and my family but it's not all sugar and spice and everything nice. On the other hand it keeps me from having to work for an unethical company which is where I would draw the line.

Great thread BTW.

Thanks for your thoughts and commiseration on the difficulties of making these decisions.

This seems off topic, but it is MLK Jr. Day, and I can't stop thinking of Czechoslovakia's Velvet Revolution in 1989 where the people threw off Communist rule. The dissident movement gained momentum as first a few individuals, then thousands, were brave enough to voice dissent. Many dissidents were harrassed, hurt by police, and spent time in prison. But eventually they turned the tide. The Communist Party saw that it had lost popular support and backed down. After the remarkably non-violent transition, the people democratically elected playwright Vaclav Havel, one of the signatories of Charter 77 who had been imprisoned for signing it.

It's a success story that started with ordinary people being true to their convictions. The Communists had required shop-owners to post pro-communist signage in their store windows. Havel encouraged people to be authentic: take down the sign if that's not what you really believe. Brave shop owners took down their signs and were harassed or imprisoned for it... but these actions spread the message throughout the society, and the Communist bullies had to leave.

Obviously, I'm an idealist... but I invite you to picture a Velvet Revolution in our markets today. What would happen if all the people who are uncomfortable with the monopolism and exploitation baked into the system chose a different store of value for our funds?
There's no risk of prison time...

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #25 on: January 16, 2017, 12:25:21 PM »
A) I once worked payroll at a company where quite a few salespeople - some with high school educations - worked 60 hour weeks but earned six-figure annual commissions in return for hitting their quotas. These "horses" drove BMWs. Other salespeople barely made a living doing the same thing, and many of these were on their way to quitting...

Here's to American pluck and hustle!  I'm glad when people do get opportunities to reap the rewards of their own initiative. I was thinking of quotas in a different sense: a close friend was told, "We upgraded your software, so now you'll be expected to get through your tasks 25% faster." The software helps a bit for run-of-the-mill tasks that take 2-3 minutes apiece, but it doesn't help with the gnatty, hairy sort of issues that end up taking at least an hour or two of every workday. These tough cookies are also the only reason this particular job is still done by humans... but that will change soon.

In one sense, c'est la vie. But I'm not sure at all we as a society can run this faster-and-faster horse race while providing (preferably non-gov't provided) soft landings for the alarming number of workers whose jobs are on the verge of obsolescence.
« Last Edit: January 16, 2017, 12:28:46 PM by liberteEgalite »

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #26 on: January 16, 2017, 12:32:41 PM »

It's moneyed interests that keep the tax code complex deliberately, allowing corporations to line their pockets while minimum wage workers don't file their taxes because it's so ****ing complex for the average person. The ones who need the tax refund most. It's quite appalling, and it's not going to change. This is how the government operates.

I agree very much with your assessment. I think many low-income people do understand the value of the EIT (Earned Income Tax Credit). High-income criminals do, too, and you can often find them stalking the mailboxes this time of year.

seattlecyclone

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Re: Ethical implications of index fund investing
« Reply #27 on: January 16, 2017, 12:47:32 PM »
What would happen if all the people who are uncomfortable with the monopolism and exploitation baked into the system chose a different store of value for our funds?

Essentially nothing. These companies would keep operating and making profits and paying dividends. A truly massive exodus out of the stock market might send prices marginally lower, but this would only mean that the people who still were willing to invest would get larger yields. You still seem to be under the impression that peoples' decision to buy stock in a company (or not) can make a meaningful difference in that company's business practices or profitability. It just isn't so.

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #28 on: January 16, 2017, 02:42:06 PM »
seattlecyclone, Thanks. I am still struggling to digest this. Thanks also for bringing my attention to the interesting proposals that ExxonMobil's shareholders got to vote on last year.

I suppose the lesson on the upside is that consuming habits are a more powerful way to send a message; I dialed mine down long enough ago that it's easy to forget there's an ongoing impact.

2Birds1Stone

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Re: Ethical implications of index fund investing
« Reply #29 on: January 16, 2017, 03:47:41 PM »
I'm with Indexer on this one.

cschx

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Re: Ethical implications of index fund investing
« Reply #30 on: January 16, 2017, 05:36:37 PM »
Alas, when it comes to the ethical dimensions of investing the entire FI community is shot through with massive amounts of hypocrisy, rationalization, and denial... as the responses in this thread amply demonstrate. There are people on this forum who could advise the OP on how to invest without compromising his or her ideals, but instead s/he can expect to witness more feats of tortuous logic explaining why it's actually OK to profit from companies that are literally engaged in rape, torture, and murder. The reason for this is obvious: Investing outside the system of publicly traded securities is risky and difficult – certainly much more difficult than throwing your money at Vanguard – and indexing presents an easy path to the coveted FI. But it's not the only path.

liberteEgalite: No, you are not missing something. You already know it's wrong to profit from evil... so find a way to profit from good (spoiler: it's not as profitable). You've already read the Cortese book, so you are on the right track, but I found it pretty vague on implementation strategies. Michael Shuman's book Local Dollars, Local Sense is somewhat more practical. Check out Slow Money and if you have time, read up on concepts like degrowth and steady-state economics. And check out some of the impressive folks on this board (like arebelspy) who achieved FI without ever touching the stock market.

To invest outside the system you'll need starter funds and a substantial amount of business/investing acumen; bootstrapping may be necessary in both areas. Unfortunately, given the way securities laws are written, investing outside the system can be next to impossible for anyone who's not an "accredited investor" (basically this just means you already have a high income and/or net worth) – although this is changing with the JOBS act and "reg A+." And the superior profitability of evil means you'll need to be willing to accept lower returns. But it is absolutely doable!

Indexer

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Re: Ethical implications of index fund investing
« Reply #31 on: January 16, 2017, 07:17:44 PM »
Alas, when it comes to the ethical dimensions of investing the entire FI community is shot through with massive amounts of hypocrisy, rationalization, and denial... as the responses in this thread amply demonstrate. There are people on this forum who could advise the OP on how to invest without compromising his or her ideals, but instead s/he can expect to witness more feats of tortuous logic explaining why it's actually OK to profit from companies that are literally engaged in rape, torture, and murder.

Hypocrisy? How about a reality check. Different people joined this form for different reasons. I want to reach financial independence sooner rather than later. I figured that is why most people are in the FI community, and I don't see how that conflicts with investing at all.

I don't have a problem investing in these companies because I'm not aware of them raping and torturing people. I'm also not aware of companies that murder people. Yes, product defects have lead to deaths, but they are defects because it was accidental. I would really like to hear which companies in the S&P 500 are 1. raping people, 2. torturing people, and 3. murdering people. Can I get a list? Cause, if that is really happening then I would support a specialized 'we won't rape/torture/kill you' index.

Kaspian

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Re: Ethical implications of index fund investing
« Reply #32 on: January 16, 2017, 09:53:48 PM »

In my view, investing in an index fund does not do that.
...
Has anyone grappled with this philosophical/ethical issue? Am I missing something? I'm interested in hearing from folks who have found investment approaches that exert a Mustachian influence on the community or the world. How can we steer capital in directions that qualify as constructive to the Mustachian mind? "Locavesting" by Amy Cortese, is interesting, yet how does a person manage risk / diversify a portfolio that includes local investments?

Sometimes I'm not sure if this is trolling or not because it comes up so often here and on the MMM Facebook page.  Other times I'm not sure if it's a psychological issue (look at how good a person I am) or just plain, old Marxism trying to push itself through.  You can always split hairs on ethical/unethical--to minutiae levels of detail.  If it concerns you, don't do.  There, easy.  I wouldn't buy from Canada Goose because of the friggin' leg traps they use on coyotes.  That's personal and no one else gives a crap.  When I look at the companies on the S&P 500 I don't think, "Oh, my God--Noooooo...." 

And, umm... And liberteEgalite?  You do see the irony in using the Velvet Revolution (anti-communist) as an example on what should happen to big capitalism, right?

You know when you're at a party and you're discussing something cool, everyone's having a good time, and then somebody randomly says, "You know that's made by little kids in a sweat shop in India, right?," and you want to throw your drink in their face and leave the table?   That.  Don't be that weirdo.

Radagast

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Re: Ethical implications of index fund investing
« Reply #33 on: January 16, 2017, 11:34:01 PM »
I actually have kind of the opposite view. Stock represents ownership of a company. If all the ethical owners leave, then unethical ownership will be the result. Better to buy and make your voice heard.

Thanks, Radagast. This is a powerful thought. What are the ways to make one's voice heard? Surely one can't voice an opinion on goings on at all 2,600+ companies represented in an index fund?
Seattlecyclone already answered probably better than I can. Shareholder voting is the most likely avenue. As he mentioned there was vote to force disclosure of climate change data. Another example I recently read about was a charity group trying to buy out a for profit prison company, though it is obviously not indexing. At the more work end of the spectrum you could research specific practices at specific companies and urge your fund provider to try and vote against them. At the easier end of the spectrum just write with a list of a handful of points you are most opposed to and try to get them to dissuade companies from those. Between them, Blackrock and Vanguard control pretty large portions of most publicly traded companies and if many people do this it might be enough to sway a handful of votes.

Now obviously this is like trying to save the planet by not buying bottled water: by yourself you won't make a noticeable difference. However, what if rather than disinvesting and walking around smugly saying "That happens, but I don't benefit from it" people say "We are trying to control shares of companies whose practices we find unethical, and pressuring index fund providers to also vote against unethical practices?" If the people behind a significant percentage of money in the market started to push these things it could happen.

Scandium

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Re: Ethical implications of index fund investing
« Reply #34 on: January 17, 2017, 07:29:19 AM »
Alas, when it comes to the ethical dimensions of investing the entire FI community is shot through with massive amounts of hypocrisy, rationalization, and denial... as the responses in this thread amply demonstrate. There are people on this forum who could advise the OP on how to invest without compromising his or her ideals, but instead s/he can expect to witness more feats of tortuous logic explaining why it's actually OK to profit from companies that are literally engaged in rape, torture, and murder.

Hypocrisy? How about a reality check. Different people joined this form for different reasons. I want to reach financial independence sooner rather than later. I figured that is why most people are in the FI community, and I don't see how that conflicts with investing at all.

I don't have a problem investing in these companies because I'm not aware of them raping and torturing people. I'm also not aware of companies that murder people. Yes, product defects have lead to deaths, but they are defects because it was accidental. I would really like to hear which companies in the S&P 500 are 1. raping people, 2. torturing people, and 3. murdering people. Can I get a list? Cause, if that is really happening then I would support a specialized 'we won't rape/torture/kill you' index.

Wow. Yes I'd also like to know which companies are literally doing rape, torture, and murder! Anyone claiming that must be sitting one some pulitzer-worthy scoop!
What were the OP examples?
Exxon dig up and sell oil. The world is free to not buy any of it. But we're addicted to it. That's not exxons fault. Don't blame the dealer for the addict's poor judgement.
Tobacco, fast food; the risks are common knowledge. Anyone who don't want it are free to avoid it. When they suppressed research on dangers of smoking, ok that was shady. But now? They're just selling something you don't like but some people are willing to do. "Oh no! Choices I don't agree with! The worst thing in the world!!"
Car loans? Nobody is forced into a car loan. "The interest is too high"> then don't get it. "there's too much fine print"> eh read it? walk away?

Mainly you're complaining that people are allowed to make choices you think are suboptimal. You think removing all sub-optimal choices would make the world better? Ironic that you mention the revolution against the communist regime, they tried that..
« Last Edit: January 17, 2017, 10:32:39 AM by Scandium »

Kaspian

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Re: Ethical implications of index fund investing
« Reply #35 on: January 17, 2017, 08:25:38 AM »
Mainly you're complaining that people are allowed to make choices you think are suboptimal. You think removing all sub-optimal choices would make the world better? Ironical that you mention the revolution against the communist regime, they tried that..

Exactly, right?!  Is your desk made from a clear-cut forest?  Where did your Christmas tree come from? Is your wife's ring a blood diamond? Is your coffee fair-trade? Is your beef causing the Amazon rainforest to disappear? Is it all your meat causing unecessary CO2 production?  Are your socks made in a sweat shop? Is ethanol keeping food out of peoples' mouths? Sorry--all your plastic items are made from petroleum badness. That company won't let their employees unionize = "evil".  So, they move the company to Mexico to get around the issue = even more "evil".  Even the vegan guy has an African bongo drum with antelope hide. Are you obligated to make a gay wedding cake?  Who decides what's ethical and what's not?  Authoritarians, that's who.

Sorry, this is a rabbit hole for crazy people who love to drag others into the den.  I think the average person is sick to death of the hysterical preaching and that's why we're seeing a backlash where unheard of world events are taking place.  If someone is genuinely concerned about absolutely everything (I don't know how they sleep at night) just Google "ethical investing", do what you will, and leave others the hell alone.

ChpBstrd

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Re: Ethical implications of index fund investing
« Reply #36 on: January 17, 2017, 08:26:08 AM »
If you truly want to make a difference in the world, moral handwashing and the piestic pursuit of moral purity in consumption and investment doesn't amount to a hill of beans. Progress has only ever been made by people organizing. Read the history of the American Revolution, the abolitionists, the suffrage movement, the labor movement, or the civil rights movement. In each leap forward for individual rights, it was organized people who pressured politicians, built massive public support, organized growing local social societies, and defeated their opponents at the polls (or in the cases of the Revolution and Civil War, at war). At the very least, it always took decades of meetings, donations, volunteering, letter-writing, rallying, and bleeding.

In a nutshell, I'm saying that worrying about index funds is a distraction. If you spend two hours researching this issue, that's two hours of volunteer labor a real-life organization could have used to promote your values in an actually effective way. If you earn $10k less over the next few years due to stock-picking, that money could have filed a lawsuit, printed a million handbills, or lobbied for change.

Today, the civil rights, labor, women's rights, and human rights movements are starving for time, talent, and money.

Meanwhile, we're all staring into our cell phones, sending data to Facebook and Google, certain that sharing a fucking meme or "liking" a "news" article changes the world in some magical way. Guess what. The only result is more effective advertizing.

Today there are few union family picnics, few local communities of like minded people, hardly any great orators, and a few empty shells of the organizations that once moved the world. And yet there is this faith that sending our petitions and complaints to some corporate cloud server makes us activists, or absolves us from abandoning our values - which we have done by doing nothing to support them. People consider their Facebook "groups" to be the same as an actual group. The meaning of "friend" is also different, and cheaper, now. Nobody realizes they're playing video games while Rome burns.

Millions of people think they are doing good by purchasing organic strawberries or recycling their toothbrushes. The activists of yesteryear would slap us out of our self-delusion if they could.

These days, people prefer push-button or consumption-based pseudo-activism, oblivious to the realization that politicians ignore online petitions, corporations ignore socially responsible investing, and their own consumption/investment decisions are completely based on greenwashing from PR departments. Totally ineffective.

So, bottom line, if you care about something, join or start an organization. Volunteer. Build networks of friends and mobilize them. Don't congratulate yourself for pushing buttons like most people do.

BTDretire

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Re: Ethical implications of index fund investing
« Reply #37 on: January 17, 2017, 08:59:06 AM »

ChpBstrd nailed it here. There's nothing else you can do.

It's moneyed interests that keep the tax code complex deliberately, allowing corporations to line their pockets while minimum wage workers don't file their taxes because it's so ****ing complex for the average person. The ones who need the tax refund most. It's quite appalling, and it's not going to change. This is how the government operates.
Really, a minimum wage workers tax form is to complicated to fill out.
 It's so simple a teenager could do it, mine did!
 I think you're stretching.
 On the other hand, I have a return that runs about 40 pages. If I refered to previous
returns I could probably do it, but I spend about an hour in the accountants office and it's done.
 I'll pay the money.

Phenix

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Re: Ethical implications of index fund investing
« Reply #38 on: January 18, 2017, 11:11:29 AM »
+1
At 16 I was handed a 1040EZ and told if I had questions, just ask.  It's really not hard to do your own taxes when all you have is a W-2.

Gondolin

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Re: Ethical implications of index fund investing
« Reply #39 on: January 18, 2017, 03:42:39 PM »
Quote
To invest outside the system you'll need starter funds and a substantial amount of business/investing acumen; bootstrapping may be necessary in both areas. Unfortunately, given the way securities laws are written, investing outside the system can be next to impossible for anyone who's not an "accredited investor" (basically this just means you already have a high income and/or net worth)

So I can invest ethically only if I already have a big pile of money that presumably, I got from investing unethically?


Re: Velvet Revolution, what would such a event look like? We stop using money? We stop using stock instruments to fund business growth?

In any case, remember that historical revolutions have survivorship bias just like everything else! For every 1 successful, bloodless revolution there are 10 failed, bloody ones where all the revolutionaries end up bull-dozed into a mass grave. You don't hear much about the failed ones.

actionjackson

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Re: Ethical implications of index fund investing
« Reply #40 on: January 18, 2017, 09:01:03 PM »
I wouldn't worry about it too much. According to AustralianEthical, Ethical investments have outperformed the market since 1994. It's only a matter of time then until those ethical practices flow through to every Fortune 500 company, as clearly ethical business acumen results in better financial results.

evensjw

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Re: Ethical implications of index fund investing
« Reply #41 on: January 18, 2017, 09:22:12 PM »
I've been looking at making sure I am not too heavily invested in fossil fuels recently, for two reasons.

1. Ethically I don't want to be invested in fossil fuel companies
2. I think we are living in a massive carbon bubble where fossil fuel companies are massively over-valued.  We already have the means to eliminate fossil fuels and still meet our energy needs, but the owners oil companies are doing everything they can to hide/refute that fact because when it becomes known, the value of their companies will evaporate.

I found http://fossilfreeindexes.com/  was a useful resource, but in reality most index funds have relatively small percentages of oil companies.

The problem, as several other posters have pointed out, is that companies in every other sector use energy provided by oil companies.

So as far as my two motivations go:
1. Not investing in fossil fuels really doesn't make me any more ethical of a investor
2. It also doesn't really protect me from the carbon bubble as when it bursts, it will take a lot of sectors down with it.

I think we are stuck having to exercise our ethical urges in the real word, and perhaps in time we collectively can change the net morality of the companies contained in index funds.

actionjackson

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Re: Ethical implications of index fund investing
« Reply #42 on: January 18, 2017, 10:51:12 PM »
I've been looking at making sure I am not too heavily invested in fossil fuels recently, for two reasons.

1. Ethically I don't want to be invested in fossil fuel companies
2. I think we are living in a massive carbon bubble where fossil fuel companies are massively over-valued.  We already have the means to eliminate fossil fuels and still meet our energy needs, but the owners oil companies are doing everything they can to hide/refute that fact because when it becomes known, the value of their companies will evaporate.

I found http://fossilfreeindexes.com/  was a useful resource, but in reality most index funds have relatively small percentages of oil companies.

The problem, as several other posters have pointed out, is that companies in every other sector use energy provided by oil companies.

So as far as my two motivations go:
1. Not investing in fossil fuels really doesn't make me any more ethical of a investor
2. It also doesn't really protect me from the carbon bubble as when it bursts, it will take a lot of sectors down with it.

I think we are stuck having to exercise our ethical urges in the real word, and perhaps in time we collectively can change the net morality of the companies contained in index funds.

Not just energy but raw inputs, plastics, paints etc. and I'm just barely scratching the surface.

Metric Mouse

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Re: Ethical implications of index fund investing
« Reply #43 on: January 18, 2017, 11:24:29 PM »
I've been looking at making sure I am not too heavily invested in fossil fuels recently, for two reasons.

1. Ethically I don't want to be invested in fossil fuel companies
2. I think we are living in a massive carbon bubble where fossil fuel companies are massively over-valued.  We already have the means to eliminate fossil fuels and still meet our energy needs, but the owners oil companies are doing everything they can to hide/refute that fact because when it becomes known, the value of their companies will evaporate.

I found http://fossilfreeindexes.com/  was a useful resource, but in reality most index funds have relatively small percentages of oil companies.

The problem, as several other posters have pointed out, is that companies in every other sector use energy provided by oil companies.

So as far as my two motivations go:
1. Not investing in fossil fuels really doesn't make me any more ethical of a investor
2. It also doesn't really protect me from the carbon bubble as when it bursts, it will take a lot of sectors down with it.

I think we are stuck having to exercise our ethical urges in the real word, and perhaps in time we collectively can change the net morality of the companies contained in index funds.

Not just energy but raw inputs, plastics, paints etc. and I'm just barely scratching the surface.

It'd be a pretty big shift to move away from petroleum products - not sure that I see that happening in the medium term.

DavidAnnArbor

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Re: Ethical implications of index fund investing
« Reply #44 on: January 19, 2017, 06:54:12 AM »


On that note, I do wish that Vanguard or another company could start an index fund that delegates shareholder voting rights to its own shareholders. It wouldn't be that hard to build a voting mechanism into the website to allow fund owners to input their preferences for any matters on which they have an opinion, and the fund would then vote the way its owners do. I'd be willing to pay an extra basis point or two for the privilege.

This is such an excellent point, I once sent a message to Vanguard about this issue, but got a very canned response back.
Here's an article by the great business reporter Gretchen Morgenson about this very issue:

https://www.nytimes.com/2016/09/25/business/your-mutual-fund-has-your-proxy-like-it-or-not.html?_r=0

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #45 on: January 20, 2017, 10:17:56 AM »

And, umm... And liberteEgalite?  You do see the irony in using the Velvet Revolution (anti-communist) as an example on what should happen to big capitalism, right?


Yes. This was a deliberate choice. You do see the parallels between authoritarian communism and what we're headed for with our surveillance-happy crony capitalist oligopoly? There's a whole lot to be learned from the anti-commies and the dire warnings they've offered for the US.

Havel addresses U.S. Congress, 1990:  http://www.youtube.com/watch?v=zplMpbZkEaM
Solzhenitsyn addresses Harvard, 1978: http://www.americanrhetoric.com/speeches/alexandersolzhenitsynharvard.htm
See also Kasparov's "Winter is Coming"

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #46 on: January 20, 2017, 10:28:42 AM »
Who decides what's ethical and what's not?  Authoritarians, that's who.

I agree; I am particularly concerned about authoritarianism. My (unreasonable?) hope is that those of us who prefer free-market solutions might make the necessary sacrifices to enact them before angry mobs demand authoritarian action.

liberteEgalite

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Re: Ethical implications of index fund investing
« Reply #47 on: January 20, 2017, 10:39:50 AM »

liberteEgalite: No, you are not missing something. You already know it's wrong to profit from evil... so find a way to profit from good (spoiler: it's not as profitable). You've already read the Cortese book, so you are on the right track, but I found it pretty vague on implementation strategies. Michael Shuman's book Local Dollars, Local Sense is somewhat more practical. Check out Slow Money and if you have time, read up on concepts like degrowth and steady-state economics. And check out some of the impressive folks on this board (like arebelspy) who achieved FI without ever touching the stock market.

... And the superior profitability of evil means you'll need to be willing to accept lower returns. But it is absolutely doable!

Thank you from the bottom of my heart for the good leads. I have been fortunate enough to "beat the market" without touching the market over the last fifteen years. I would be a fool to believe those who say it's not possible. I'd also be a fool not to plan against a reversal. Thanks for the encouragement!

Gondolin

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Re: Ethical implications of index fund investing
« Reply #48 on: January 20, 2017, 10:50:46 AM »
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who prefer free-market solutions might make the necessary sacrifices to enact them

I'm still struggling to understand what your 'free market solutions' would be and how you think they would be implemented.

Gondolin

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Re: Ethical implications of index fund investing
« Reply #49 on: January 20, 2017, 10:52:10 AM »
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I have been fortunate enough to "beat the market" without touching the market over the last fifteen years.

Can you share how you did this?