The past week, investors bought up millions of shares of Hertz, a bankrupt rental car company that’s stock is essentially worthless.[i] And so many investors piled into wanna-be electric vehicle maker, Nikola, that its market value briefly matched that of Ford Motor Company—before Nikola has even made a prototype vehicle.[ii] Robinhood, an online trading app that is adding millions of users, intentionally seeks out unsophisticated investors and profits from their ignorance.[iii]
These headlines reflect the difficulty most investors—and those who advise them—experience when navigating regular markets, let alone markets undergoing intense stress. They remind us how important it is for investors and advisors to intentionally determine why they invest. In a world of infinite activities, hobbies, and professions, why do this?
Most investors invest to make money. But the goal of making money does not, in and of itself, provide clarity or guidance when it comes to investing. It can make one vulnerable to over-hyped or even fraudulent investments and encourage unlimited greed and abusive behavior. This singular motivation can lead to perpetual dissatisfaction because there is always more money to be made and always roads not taken that foster regret. Money makes a better means to an end than the end itself.
So why else should someone invest? In our experience, investing (and investment advising) works far better when there are underlying values that explicitly inform the reasons investors look for opportunities, make commitments, take risk, and entrust companies and governments to be profitable, generate earnings, and repay debt.
As we all contemplate the implications, good and bad, of COVID-19, economic lockdown, renewed fervor for social justice, and the ongoing challenge of climate change, investors and their advisors have a rare opportunity to reflect on why they invest. There is no one answer, but it is important to have at least one answer. Some possible reasons to invest include:
- Provide security
- Preserve wealth
- Pass wealth to another
- Feel a sense of self-worth
- Provide income
- Protect against inflation
- Create opportunities for oneself
- Create opportunities for others
- Gain access to power and influence
- Self-determination
- Learn
- Change the world
- Heal wounds we have inherited
- Plant seeds for future generations
Syntrinsic started as a mission-driven social enterprise. That said, it was only in the past year that we clarified and embraced the reasons we invest. Like many, we long had known intuitively why we serve investors; and like many, we had not yet put those reasons into words.
Syntrinsic invests to co-create a sustainable and generative world that empowers all people. That is why our firm exists. It is why we invest and advise others. It defines who we serve and how we serve them. As we discuss in team meetings on a regular basis, Syntrinsic does not exist to manage money. Managing money is what we do. It is our means to an end. We exist, however, to have a profound impact on the world.
Our clients invest to reduce hunger. To educate. To heal patients. To create economic opportunity. To inform. To advocate. To strengthen faith. To help others gain access. To right wrongs. Some exist to maximize impact today, while others keep a firm focus on future generations. Most balance living for both today and tomorrow. And when market conditions get frothy and investors get careless, when bonds pay negative interest and worthless stocks skyrocket, they can ground themselves in knowing why they invest in the first place.
Those who have the resources to invest and/or the influence and power to invest on behalf of others face a formidable and yet privileged responsibility. So if you have not had a chance recently to reflect on the reasons that you invest—whether for yourself or for others you serve—we suggest taking a few minutes this week to revisit your motivations and aspirations. Jot down the reasons you invest and place those words somewhere you can find them for the uncertain investing days ahead.
And if you are inclined to share your rationale with us, please do. We are always curious to learn more.
[i] https://www.cnn.com/2020/06/19/investing/premarket-stocks-trading/index.html
[ii] https://www.cnbc.com/2020/06/09/meet-nikola-the-speculative-electric-vehicle-stock-that-traders-believe-is-as-valuable-as-ford.html
[iii] https://www.bloomberg.com/news/articles/2020-06-19/robinhood-s-newbie-traders-ignore-danger-signs-to-bet-on-markets?sref=CFUM8seG