Investing as an Exercise in Personal Philosophy
2021 seemed to be the year that all my friends got into stocks either by buying some or by talking about them. In both Canada and the US it has never been easier to invest in the stock market thanks to a number of internet brokerages and trading apps like Robinhood (US) and Wealthsimple Trade (Canada). A combination of ease of access, curiosity and greed have ushered in a new generation of retail investors that get their investment advice from TikTok, reddit memes and trade from the couch on their phones.
Middle-aged CNBC-watchers and Wall Street Journal subscribers all over the world are shaking their heads at the recklessness of these ill-advised investors, and yet I can’t help but to be optimistic about the impacts of this trend.
There’s no doubt that combining bored young adults in lockdown with access to the stock market can have disastrous results. However, these sorts of results are usually due to a lack of willingness to understand the basic principles of investing, as well as risking more money than one can afford to lose. Despite the influx of “YOLO traders”, many more newcomers are making a genuine effort to understand the mechanics of the beast we call the stock market. I believe that this is the great benefit in taking the plunge to investing. What might have seemed like a distant, illegible, confusing activity, now becomes something you are literally invested in.
Numbers on a ticker symbol might as well be hieroglyphics until you have some skin in the game. Now you have to make sense of it all. This newfound hobby provokes its participants to actively engage in conversations about their stocks, business and economic trends they would have otherwise ignored. Don’t get me wrong, I’d love to buy myself and everyone in my family Tesla’s and stuff hundred dollar bills down people’s throats million-dollar-man-style, but investing is about so much more than trying to get rich.
Aside from being an instrument for wealth generation, investing in stocks is also a way to participate in and stay informed about the way the world is moving and changing. Whether we like it or not, progress and change in our society are largely determined by companies in the flow of commerce and capitalism. The stock market can be seen as a way to bet on companies that align with our vision of the future.
In that way, value investing is a sort of exercise in personal philosophy.
- You take a look at the world and make a hypothesis about what the future might (or you hope might) look like based on what you know is happening in the world today.
- You study the public companies involved in building out your hypothesis
- You distill this knowledge into investment decisions
Having an educated and well thought out assumption about where the future might go can serve as the foundation to your investment decisions. In this sense, the market can be a validator of your own ideals.
It’s true that the market doesn’t care about your personal philosophy. What really makes a great investment decision is one in which your values align with what makes most economic sense. For example, the success of companies like Tesla and Beyond Meat are an indication that the free markets are voting for clean energy and environmental sustainability. I suspect that these trends will continue as millennials and Gen Z bring the weight of their values to the market. It’s not a perfect system but we can cry about it or work within it by voting with our dollars. It doesn’t hurt that you stand to make some good money along the way.
Disclaimer: This is not investment or financial advice. I’m not your mom or your dad (at least I’m pretty sure I’m not but you can’t prove it without a paternity test and I know you don’t want to go through all that trouble) . The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our Site constitutes a solicitation, recommendation or endorsement.
