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Thursday, September 02, 2010

Good Returns by George P. Schwartz

In his new book, Good Returns: Making Money by Morally Responsible Investing, author and Chartered Investment Counselor George P. Schwartz, CFA, calls Christians and conservatives to pursue a portfolio that reflects their values. “When you buy stock in a company, you are not just holding a piece of paper. You become part owner of that company, and that role includes some rights and responsibilities,” says Schwartz. “Your financial investment is supporting something, and you need to do the research to ensure that you are not supporting or tacitly agreeing to activities that are morally abhorrent to you.”

My Review:
When the opportunity to review this book came across my inbox, I was immediately intrigued. Until I heard about this book, I hadn't even considered the idea of choosing investments based on my moral beliefs. I thought it was a fascinating idea, and so I took a look at the book.

For those who are not well-versed in investment terms and ideas, aka me, this is a very hard book to read. It took me a lot longer than usual because I had to stop and research terms and investing principles. This is such a foreign world to me that I honestly didn't know how to contextualize his information. It made me realize how ignorant I am in terms of investing and finance.

That said, I feel like after really taking this apart and studying it, I do have a better grasp of investment terms. I also think, having read this book, that when I decide to invest my money, I won't just be looking at the ROI- Return on Investment. I had never thought of myself as a part owner of a company I'm investing in, but he's right. And I think we do need to pay attention. When we put our money in a mutual fund, what exactly are we funding? Do most of us even know?

I don't necessarily agree with all of the moral standards he puts forth as being a criteria for the companies to invest in. However, I think the larger point is that as investors, we need to look at where our investments are going. For me personally, the next time I sign on the dotted line, it will be knowing fully whether or not I'm investing in a company that shares my values and is going to be supporting my beliefs. I think it's something we all need to do- yes, we should research whether or not our investment will bring us good financial returns, but it's also time we looked at the moral returns of where our money is going.

A Q&A with George P. Schwartz, CFA

Q: What does it really mean to be
an investor?

A: When you buy stock in a company or equity in a mutual fund, you become part owner of that company. You are not just holding a piece of paper. Your role as part-owner includes some rights and responsibilities. The company you own acts in your name, not only in delivering value as an investment by maintaining and improving its profitability but in what it does on a daily basis. Knowing how the company or fund is spending money is both your right and your responsibility. Your financial contribution is supporting something, and you need to do the research to ensure that you are not supporting or tacitly agreeing to activities that are morally abhorrent to you.

A 25 minute pre-recorded interview with George Schwartz featuring Good Returns is now available at www.uReadBooks.com/Schwartz. You can preview the interview in the audio player, then download the program at right to play on your station at your convenience.
Check out the other great uReadBooks interview programs available while you’re there.

Q: Why do Christians, particularly those who actively practice their faith, have the potential to be successful investors?
A: It would be downright silly to claim that only good, moral and religious people can succeed at investing. There are numerous examples of dirty, rotten scoundrels who have made killings in the stock market, so many, in fact, that the idea of ruthlessness as a prerequisite to investment success is a common cliché—the “Gordon Geckko” model, as it were. Yet, I am convinced that there is a certain relationship between conviction in spiritual matters and acumen in analyzing the market. I think that relationship lies primarily in two areas: (1) an ability to see beyond surface features into inner realities; and (2) a willingness to dedicate oneself to disciplined practices over time.

The Bible is filled with commercial imagery and financial references that have provided the basis for centuries of reflection on economic and business matters. Some of them comment quite explicitly on the virtue of investing for the sake of future security. Devout Christians have learned the concept of delayed gratification, for example. They are better able to withstand the ups and downs of the market, and they would be less likely to panic and make emotionally-driven decisions in the midst of financial crises like the market meltdown of October 2008.

Q: For moral people, there is a certain peace of mind in screening out companies whose practices conflict with their values. But do they suffer financially for that decision?

A: In a word, no. You might be surprised to discover that in following the strict guidelines for screening companies, the Catholic Advisory Board of Ave Maria Mutual Funds has only excluded about 150 companies—out of the 3,000 companies in the Russell 3000 Index. And there is nothing that says all of these rejects would have been good investments in the first place. Take the pornography industry, for example. A cursory observation of our sex-saturated culture would lead some investors to believe that the pornography industry is a sure money-maker. That couldn’t be further from the truth. In fact, the industry is crumbling. Who wants to pay for a skin flick or magazine when you can get it for free on the internet? Immoral or not, it’s likely to be a bad investment.

There are many reasons why morally responsible investments are also financially profitable investments. Companies that appreciate in value—and whose shares rise correspondingly in price—are generally companies that are well managed, whose decision makers follow sensible business practices, offer good products, and deal ethically and reliably with their suppliers, employees, and customers. In other words, they are morally responsible.

Good Returns: Making Money by Morally Responsible Investing by George P. Schwartz, CFA
Geodi Publishing May 2010
ISBN: 978-0-9844042-0-9/191 pages/hardcover/$25.00


Special thanks to Audra Jennings of the B&B Media Group for providing me with a review copy.

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