Some of the principles of socially responsible investment date back thousands of years, to the teachings of all major religions. At its core, socially responsible investment is ethical conduct as it relates to our financial partners, the companies and mutual funds that we invest in. Our free enterprise system comes with a cost. Companies are motivated to focus on bottom-line profits, and in the process society’s best interest is often sacrificed. The areas of concern are broad; corporate governance issues, which span everything from excessive executive compensation to transparency issues, workplace practices, environmental impact, human rights abuses, animal welfare, community relations; the activities of alcohol companies, tobacco companies, firearms and weapons manufacturers, and companies promoting gambling- each of these in some way have a detrimental effect on society in general. If we are people of integrity, we must support companies whose primary objective is a concern for the future. It is a dual focus that we encourage-financial performance with social integrity.   

Understanding Value Investing

When it comes to investment, the individual is handicapped. A recent study highlights the psychological issue. It seems that people with a specific type of brain damage, which causes them to lose their ability to experience fear, make better investors than people without this disability. It is investor psychology, our emotional decisions motivated by fear, and as well as by comfort and ( dare I say ) greed, that cause us to make decisions that run counter to our intention.

Statistics bear this dynamic out. In a period of time from 1984 to 1996, the average return for an equity mutual fund was 9.6%. The average return for the individual during that same period? 2.5%. Decisions were made at exactly the wrong time, based on fear or comfort.

A value approach encourages the investor to gain an understanding of what it means to be the owner of a real business. In essence when we own the shares of companies, that’s what we are. We have the opportunity to voice our opinion regarding company direction and activities. When we can evaluate the true value of a company based on its products, its management, its market share, its cash position, its history and its future, we begin to feel like owners, not of some unidentifiable investment, but of a real and going concern, a real company. This understanding is the enemy of investor psychology, the enemy of fear.