Are We Called to Invest? Why Is Investing Necessary?

Morally Responsible Investing (MRI) consortium topics.
by Samuel Gregg | Source:
“The decision to invest in one place rather than another… is always a moral and cultural choice… The decision to invest… is also determined by an attitude of human sympathy and trust in Providence, which reveal the human quality of the person making such decisions.” (No. 36)
-Pope John Paul II, Centesimus Annus

The MRI Consortium provides a one-stop web-based kiosk, for Morally Responsible Investing, to include, cross spectrum topics such as: definitions and “how-to’s”; thus, ensuring that every faithful Catholic has a means to achieve their financial goals, while adhering to the sacred truths of The Kingdom.

Do you remember the “good ole days?” What kind of emotion does this expression invoke? Particularly, what does the expression mean? Have times changed in regards to morality? What about investing?

Does the expression indicate, that once upon a time, a family could listen to radio/watch TV, without worrying about questionable content, that was morally reprehensible, and/or, does the expression mean that you could leave your door unlocked at night without worrying about crime? In regards to investing, what past principles are still valid, if any?

Some will contend, that times have not changed, and, the transgressions against one’s neighbor have not and will not change due to the human propensity to sin.

Hence, when you look at prevailing events in the past decade, such as: the high divorce rate, the tolerance of homosexuality acts, the number of legal abortions being conducted each day, sexual predators, and high school killings, etc., how can one not acknowledge that the days of today are not as morally conscious as the “good ole days”, due to an infestation of what is now deemed the notion of morality being relativistic. Pope Benedict XVI warned of this infestation, as society now seems to tolerate and view morality as relative.

From a rationalization standpoint, one can speak of today’s societal advances, by mentioning all of the modern conveniences: e.g. household appliances and computerized vehicles with GPS integrated technology. Moreover, the battery technology advances which allow for a conduit of wireless connectivity are inducing more flexibility and mobility in society, leading to globalization.

Thus, regardless of whether you prefer the modern conveniences of today or the more morality consciousness of yesteryear; are these two concepts mutually exclusive?

By utilizing technological advances in computer connectivity and access to real-time data, you can become better educated, to include ways to invest morally. However, to be able to manage and control your own equity portfolio, with the propensity to outperform the major market indices, you need access to data and connectivity.

What hasn’t changed is the reality of inflation, which provides the answer to the question inferred in the title, particularly, because of inflation; you MUST invest, since, if you have any hope of preparing for financial independence to be postured to serve God, by giving more time to God in stewardship, then you will need freedom from the time constraint, avoiding the need to spend the majority of your time having to be concerned with making money, which may be realized only by an individual investor, who is prudent enough to invest and hedge out inflation in the long term.

Therefore, one must understand the concept of combating inflation, defined as, according to The American Heritage Dictionary:

A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money caused by an increase in available currency and credit beyond the proportion of available goods and services.

Combating inflation is essential and can be illustrated by looking at how the dollar, overtime, loses its purchasing power. Let’s take the first time that consumer price indexing data was available (1913). If you look at the equivalency of the purchasing power of one dollar in 1913, it would now take (based on 2005 year), $19.63 of 2005 U.S. currency to equal $1 in 1913. Therefore, if you kept a dollar from 1913, you would need $18.63 MORE to provide you the same purchasing power that you had with one dollar in 1913!

This means that in order to combat inflation, you MUST invest, and, your return must significantly outperform the rate of inflation. Direct long term equity investing, historically, has been the best means to hedge out inflation for the long term.

To be prudent is to recall the Parable of the Talents (Matthew 25:14-30), which lauded the servant that took five talents and achieved five more talents by “trading with them”. This servant was a good and faithful servant, who shared in the Master’s joy; whereas, the servant who hung onto the talents and buried them, the Master dictated, “throw this useless servant into the darkness outside, where there will be wailing and grinding of teeth.”

From an economic perspective, most people have heard about inflation and the necessity to combat inflation, but how many people have actualized this principle?

If you are investing in an instrument that is not keeping up with inflation, then, you are actually losing money. The average rate of inflation from 1913 until present is 3.43%, which means on average you break even when you achieve a return of 3.43% (now you can see why savings accounts tend to lose actual purchasing power over time). 

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