Someone I know and who is considerng ordination is trying to figure out the best way to provide for his family (I think there’s a story by Ajahn Brahm about a burmese monk who worked hard for many years before ordaining to provide for his family, and this actually was a way of building letting go momentum that later helped him in his meditation).
The question is, once you’ve worked hard and saved money and you want to invest it for your children say, how do you reconcile investing in today’s highly complex world with right livelyhood? For example, right livelihood involves not dealing in intoxicants or weapons - and anyone investing in a widely diversified mutual fund or ETF will own shares of companies producing tobacco, alcoholic beverages or weapons.
Another interesting question is that of Bitcoin that is becoming hugely popular these days: leaving aside the question on whether it is an investment or a speculation, there seem to be important ethical questions concerning it: some economists argue that with currencies backed by governments, ‘an expansion in the money supply traditionally provides the government with extra resources. As it should, the proceeds of issuance go to the community.’ This is not the case with Bitcoin, which is mined by individuals for their own gains, in a process that moreover uses enormous amounts of energy :
So how does one go about dealing with such complex questions in today’s world? Unless one is to leave money in a bank account, which in no solution in the long term (e.g. if they have young children) because of inflation, investments seem to involve becoming entangled with the complexity of the world, including its unethical aspects.
Would appreciate your take on this admittedly unusual question.
This is what they want us to believe, I disagree with this conclusion The money of QE for example has not been percolating through all layers of society but has only resulted in inflated asset prices that benefit only banks (criminal institutions for most of them) and the rich. Plus, most of the money is not created by the goverment anyway but by the process of credit creation controlled by banks, which is an unsustainable system that promotes debts, a culture of spending and consumption, inflation etc.
Bitcoin was and is a direct reaction to this system (see genesis block message for example referring to the 2008 crisis). It is fighting the danger of total control of people data by goverments and a few big companies. Society is going cashless and digital, blockchain technology have emerged just in time to avoid a full-scale ‘big brother’ world.
For bitcoin, the present-day electricity consumption for mining purposes is definitely a downside, I hope it will be only a temporary effect that will change in the near future through protocol updates.
Ok enough about bitcoin and sorry for being a bit off-topic
To come back to your OP questions regarding investments, I don’t think there are perfect solutions unfortunately. I guess keeping cash in accounts that don’t generate any interest would be the less damaging option for the world around us (interest free because why should we earn money because we have money? it’s a rich get richer, poor gets poorer system…). It does not protect from inflation though. Maybe I would try to educate my family in order for them to take the decisions themselves of what to do with the money
But ultimately, whatever precaution we take we have to remember that we are not really in control, and that despite carefull planned investments any wealth can be lost very quickly.
Thanks for your message! I do like Bitcoin fans when I see videos of them, and I admit that I don’t know enough about QE and Central Banks in general. But the economist I quoted is Jean Tirole, a French Nobel Prize winner who ironically is criticized in France precisely for not believing enough in State intervention!
A Buddhist involved with Bitcoin suggested that I read, to understand the FED, The creature from Jekyll Island by G. Edward Griffin. I dipped into it; the author is definitely intelligent but he is an extreme right wing conspiracist so my understanding so far is that calls to free people from Central Banks seem to be associated (at least partly) with that political ideology.
Anyway, now it’s me who is going off topic! I do agree that the best thing is to educate one’s children about money and investing, though the person I was mentioning has quite a young child and it’s probably impractical to do so at this stage.
I know very little about investing, and while I find the first article you linked to somewhat interesting, I don’t think it totally makes sense from a Buddhist perspective…
In my understanding (IMU?), right livelihood necessarily entails not dealing in certain things (alchohol, meat, weapons etc…), but as far as I know, there is no requirement to prevent other people who _do_deal in those things from making profit. This article seems to look at socially responsible investing as if the goal was to bring down corporations who have unethical business models, or something like that. From my perspective, the real point would be keeping your own hands clean, as it were.
Personally, if I were to invest, it would be in individual companies whose business conforms to right livelihood, or in SRI funds.
I am a bit of an investing buff so I was interested to see this post. My handling of this situation is to own mutual funds or ETFs which include the total stock market so I am not investing significantly in really any stock at all but a index of them. There may be ones among those who have ethical issues like sale of meat or liquor, but my intention isn’t to buy those. I try not to own individual stocks. I also find that socially responsible funds include companies that have their own problems with ethics so it is no garuntee of anything. The measure of what is “responsible” varies hugely and it assumes that we as outsiders can know with any degree of certainty that companies are acting appropriately.
I subscribe to the Bogleheads approach-- keeping it very simple, living moderately, protecting your wealth, and not getting involved in any fads.
Regarding Bitcoin, oh boy. Please do yourself a favor and stay away from that. That is beyond risky and is clearly a bubble. If you are worried about conscienciousness of investments than you certainly should avoid Bitcoin!
This may be a rationalization, but I see investing in mutual funds and ETFs as no different than being a citizen of USA or putting money in a bank.
When you put money in the bank, the bank is authorized to loan out 10 times the amount you hold in deposit. They loan out your money to businesses and charge interest. The businesses they loan out to? Some small and familiy busnesses, but also large corporations that are in your mutual funds and ETFS. And even if it was all small personal , family owned small business, they have to do business with large corporations to operate. So even if you try to find a small family owned bank, the world economy is intimately connected.
So basically I treat holding investments in broad based ETFs and mutual funds as no different than putting money in a bank. Only difference being a bank savings account gives you a fixed interest rate of return, ETF or mutual fund will be variable rate according to your tolerance for risk.
haha I didn’t expect to find a boglehead here! I like that website - btw I’ve seen quite a few threads on Bitcoin there too now - I think there was even one on Swedroe and Bitcoin recently.
I understand your approach of using market cap weighted ETFs, but I dont understand what you mean by:
Say one buys VOO (if they are in the US), then they know that by buying it they will own shares of say Walmart, which also sells liquors, and Philip Morris (tobacco). So if they intend to buy VOO doesn’t that imply that they also intend to participate (albeit in a small measure) to e.g. selling intoxicants and producing cigarettes?
I am tickled to find a Boglehead here! We’ll have to get together on that. Maybe you saw the thread recently where we were discussing meditation which got shut down for being about religion!
So VOO is 500 stocks. VTI Total Stock Market is over 3000. My point here is my intention is to buy an index of the total stock market, not individual comapnies. That is not a vote of support in the company like it would be if you bought for example stock alone in Atria or Hormel. I am not dealing in the trade of meat or liquor. Granted, owning the index will have exposure to those industries, (fairly miniscule ones).
I would argue so would owning even “socially responsible” funds by economic ties and business partnerships with companies that sell meat, liquor, intoxicants, etc. The economy is increasingly intertwined and separating out who is a good actor from who is not is very very difficult. For instance, if I own stock in a hotel chain, they buy alcohol and meat for their customers.
We invest in stocks for retirement, to grow our wealth to take care of ourselves and our families. I think investing in an overall index is a good way of avoiding ethical problems that could come with any effort to cherrypick specific investments-- Bitcoin, individual stocks, greedy hedge funds, or even the high fee mutual funds.
Finally, I think the boglehead philosophy is in good agreement with the ‘middle way’ I think there’s a lot of ego involved in wanting to beat the market. I remember reading in Ben Graham something like: ‘getting average results is easy - getting better than average results is extremely difficult.’ Why do so many people want to beat the market and are not satifsfied with simply replicating the index? I think it’s because of the ego… Because if one just acts rationally, it’s well established that in the long run if you buy ETFs you are better off than the vast majority of active investors
Oh absolutely! Talk about greed taking over when you chase better returns. Benjamin Graham, Jack Bogle, and even Warren Buffett said it best-- Index funds do better anyway! I find index investing really pares down on the greed. I try to do the 3 fund thing as much as possible. I recently started a 401k for the employees of my business and you better believe I stuck all index funds in there-- basic, low cost ones so they can have the best result. They still don’t contribute as much as I tell them do but what can you do? I find the Boglehead approach is fairly in line with Buddhist ideals-- modesty, generosity, responsibility to family and loved ones. All about protecting wealth which the Buddha talked about frequently for householders.
Unfortunately I have to agree that the groups challenging the present-day institutions have often not the best values themselves! But there are a few good people here and there
When I started to understand how money was created in the modern world and what happened in 2008 and its aftermaths, I was shocked and angry at the system. At the beginning I thought that it was all orchestrated by a greedy and powerful elite, now I think it is just a chaotic system of greedy individuals. No collusion, just a human mess…
But still, audit the Fed!
Sure, you can find the text contained in the first block here for example: Genesis block - Bitcoin Wiki
Basically, the first block contains the text “03/Jan/2009 Chancellor on brink of second bailout for banks,”,
As the wiki said: ‘this was probably intended as proof that the block was created on or after January 3, 2009, as well as a comment on the instability caused by fractional-reserve banking.’
It will if price continues to increase and if the proof-of-work protocol stays the same. If price goes down, miners will stop mining because it becomes unprofitable, hence electricity consumption would decrease. But to be honest, what would be needed is to change the proof-of-work itself, to re-adjust the incentives to prevent such an expenditure of energy. On the other hand, this expenditure of energy has generated the first immutable record in history, and this could be harnessed for useful purposes. See this video for an introduction to this concept.
Not really, bitcoin was completely ignored by the wealthy and powerful until very recently. Most present-day bitcoin millionnaires are nerds and penniless students who were interested by the tech and ideology behind it. And they had to, because for a long time no one was sure that it would take off as it did. A few were rich before such as the Winkelvoss brothers or Roger Ver. It’s only this year that bitcoin has started to attract big money.
Truly, it is risky. One should only get some if interested by the underlying ideology and future prospects or to learn the mechanisms. Regarding bubbles, well, what about the stock markets right now? and how does the 2013 bitcoin ‘bubble’ looks like now? (1000$ was considered a big bubble at that time). Bubbles are easy to define afterwards, when looking at charts, but anyone who think he can predicts prices is fooling himself. Have a look at the history of people predicting bubbles and the death of bitcoin since 2010: https://99bitcoins.com/bitcoinobituaries/ I would certainly not try to predict anything.
Given the very minimal utility Bitcoin has proven to have for real economic transactions, it is perilously close to being nothing but a pure Ponzi scheme. The returns it generates for its investors aren’t based primarily on the increasing value of fundamentals, but only on the money put into it by further investors - which is one of the reasons these “investors” are constantly talking it up and trying to attract more suckers.
It seems to me like a very, very bad vehicle for Buddhists, since much of the utility it does have is for black market activity in drugs, prostitution, smuggling, trafficking of humans, money laundering and blackmail. Investors in such activity are profiting from human suffering.
At some point, governmental authorities should shut it down, although I am sure some of those authorities are also interested in capturing the blockchain technology to carry out clandestine activities of their own, and to help their donors and cronies outside government hide their wealth.
Bitcoin is totally unregulated and mysterious. Nobody runs it. Much of what it is used for is illegal activity. Moreover, almost nobody understands how it works. I try not to get involved in investments I don’t understand.
Stock markets have bubbles and crashes and recessions. But over the long term-- decades and decades, it produces good returns. Cryptocurrency is totally new and has no track record.
That isn’t to say all cryptocurrency is BS-- some of them are more transparent than others (ethereum for instance sounds more “responsible”). There is something to the idea of crypto but which ones of them are what-- that will takes years to suss out. I won’t be along for the ride.
this pushes to the extreme the definition some people give of gold - ‘you buy it in the hope of finding a greater fool down the road who’ll buy it back at a higher price’. It’s true that Bitcoin fans have an unwavering enthusiasm in its value (something that had puzzled me at first (I used to ask myself ‘how can they be so sure?’ - but I see more and more how this is related to what you say above).
Interesting point, because I was introduced to Bitcoin precisely by a very serious Buddhist (at least I’m sure he has been a very serious Buddhist in the past). This person has mentioned in contrast that Bitcoin ‘opens up commerce for the 4B ppl in world with little to no access to banking. Bitcoin is a peaceful revolution which is literally saving lives in countries like Venezuela’.
Anyway it’s interesting that just like the fans have unshakeable confidence, the critics seem pretty certain that it’s a speculative bubble and that it will probably get shut down (I am not sure how easy it would be in practice for governments to do(?)). I guess these two extreme opposite views probably translate into its huge volatility. I personally see the cleverness of the technology but I’m just too ignorant of many other aspects related to economics (except for the obvious fact that it has no intrinsic value, doesn’t generate any cash-flow nor dividends etc) to have an idea of what will happen.
Thanks for the interesting and very important question.
As I have never invested in anything, my opinion is pretty much worthless. But that never stopped me before!
If I did have money to invest in, the first thing I’d do is look for a personal connection. Look for organizations or people who are doing something great, and go and check it out. Spend some time with them, and see how it checks out, the dedication and commitment, the organization and management, the soundness of their economic basis. If they have a volunteer program, spend a fortnight working for them. Look for something that actually achieves something valuable.
What kind of organization is like this? Well, here’s a start:
I’m not so sure about bitcoin. Owning that would be highly risky. Could quadruple your money or alternatively it might crash to near zero as some other technology elbows it out. I’d wonder if we’ve reached the “shoeshine boy” stage with it: Joe Kennedy supposedly knew it was time to exit the stockmarket, in the late 1920’s, when his shoeshine boy started giving him stocktips ).
Your link about ethical strategies being counterproductive does use a fairly convoluted argument (I’m not sure I buy it). Maybe there’s something to it, but probably only one factor out of many (some running in the opposite direction).
I guess directly investing in a chain of breweries, big tobacco, or weapons manufacturers etc. is out. Buying the whole stock market in an index tracker does dilute down the percentage of “sin stocks” to an extent (perhaps acceptably so).
There are a huge range of ethical investment funds with a diverse range of ethical criteria. Is avoiding “sin stocks” enough? However, if one adds other measures, the pick of stocks to choose from becomes more and more limited (environmental factors, meat production, employee working conditions etc.), probably impacting returns. And ethical questions are complex, e.g. some food conglomerates may produce alcohol though being only a small percentage of their business. How little is too little?
You could check out funds run according to Islamic principles (I’m serious! ). They’ll avoid the “sin stocks”, companies holding too much debt (plus pork also! ), and some be big enough not to have overly big overheads, e.g. the Amana Mutual Fund (see wiki page here), which seems to have performed quite well historically.