How To Invest Ethically Without Sacrificing Returns: My 3 Step Blueprint

Ditch the ESG nonsense, this is how to actually ethically invest

📈 What Impact Do Your Dollars Have on This World?

Most people have come across the notion that “investors” are morally indifferent and often selfish in their decision making. Typically, in this notion there are 3 claims:

• A. Investors only care about their returns

• B. The returns are often from “immoral” companies

• C. An investment majorly supports these “immoral” companies to thrive

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🌱 A More Nuanced Take

I believe this is partially true and partially not, and I want to bring a nuanced perspective to this issue.

A. I do think it’s true most investors don’t think much about ethics in their decisions.

B. I personally think the success in capital markets that goes on today is good, but it’s not nearly as boosting to life quality compared to 100 years ago. What’s the net good of Facebook, Instagram, or Netflix?

C. This is where the prevailing theory is quite wrong.

Less than 1% of stocks bought and sold last year in the U.S market were IPO’s or secondary share issuances.
Meaning your purchase dollars didn’t go to the company — they went to another seller of the stock.

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If an upper middle-class American puts $5,000 into Netflix, you would own 0.00000099% of the company. AKA nothing.
And here’s why I point that out:

99+% of the time, the only positive effect of buying a stock is the upward effect on the share price.
This upward effect over time increases:

• Executives’ compensation

• The value of their stock ownership

• The company’s potential benefits of acquisitions, getting acquired, and future stock issuances

The issue is that for the average retail investor — whether it’s a large stock or small cap — your individual impact on the share price is almost absolutely zero.

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📊 But What About Investment Outcomes?

If you made a great investment in Meta (Instagram, Facebook, Metaverse, WhatsApp) in 2022 near its low, a $10,000 investment would have had practically zero impact on the share price.

However, for the average American family, that investment would have turned into over $60,000 (as of writing).
That is impactful, and can help with:

• Retiring

• Taking care of family and friends

• Giving to meaningful causes

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⚖️ The Ethical Investing Dilemma

There is a legitimate ethical argument for investing in an unethical business when one knows well that it’s a great opportunity.

That being said, I emphasize the word argument — because you can get very good results investing in only “ethical” businesses as well.

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🎯 My Goal With This Article

I’m not telling you to “ethically” invest or not — what I am trying to do is open up the reader to intentionality about their investments.

To understand that:

• There’s a valid utilitarian argument for investing in unethical businesses

• And a valid virtue-based argument for investing in ethical businesses only

It’s up to you to reflect on this based upon your personal values and beliefs.

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📌 Ethical Investing Strategy (With Examples)

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✅ Step 1: Identify Ethical Operators

Look for a business that is:

• Serving their customers and employees well

• Not doing a disservice to other stakeholders

Example:
Costco has created a system that sells quality goods and services at incredibly low prices.
They pay above-average wages with very good benefits, and don’t do scandalous or immoral things to other stakeholders.

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✅ Step 2: Ensure the Business Has a Strong Moat

A business passing Step 1 must have a fantastic moat and good microeconomics, making it a good option for very long-term investment.

Example:
American Express gives substantially above-average benefits and service to its cardholders.

Its good practices are protected by:

• Strong network effects

• A well-known, highly desirable brand

• Above-average cardholder benefits

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✅ Step 3: Dollar Cost Average (DCA)

The stocks that meet criteria 1 and 2 are often expensive due to their expected long-term safety and outperformance.

That doesn’t have to disqualify them. If you identify a group of businesses meeting both Step 1 and 2, you could:

• Invest a fixed amount in the businesses each year

• Over time, your cost basis would be unlikely to be relatively expensive

When executed well, these rules could produce an ethical method for achieving good to very good investment results.

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⚠️ Final Thoughts & Disclaimers

Please understand that I don’t know your personal financial tolerances, needs, or plans — so I cannot give you financial advice.

I used AI to clean up the format of my original writing so it’s more readable, but all of the ideas, arguments, and perspectives are 100% my own

You should do your planning (or work with an advisor) if you want to thoughtfully incorporate ethicality into your investing.

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I’d love to hear your thoughts and comments — especially on this one.

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Margin Of Wisdom