Morals Improve Stock Market Returns?

When it comes to investing, many question the role of morals in relation to one’s portfolio performance. Can you have profits and principles? Or do you have to sacrifice one to gain the other? After all, don’t those who lie, cheat, and steal make the most? And those who are honest, ethical, and true to their moral compass suffer?

This is truly how many Americans think. You have to sacrifice returns in order to pursue your values and faith. Yet this myth is exposed as a lie in a recent study done by Ameriprise and Doug Lennick. Doug, who co-authored the book Moral Intelligence: Enhancing Business Performance and Leadership Success, looked at companies whose leaders promoted a strong tradition of moral intelligence. He found that the companies with the highest moral intelligence were also the best-performing companies. He wrote “A funny thing happens when leaders consistently act in alignment with their principles and values: They typically produce consistently high performance almost any way you can measure it–gross sales, profits, talent retention, company reputation, and customer satisfaction.”

The Lennick Aberman Group and Ameriprise Financial study revealed that financial advisors with the strongest moral, emotional, and behavioral competencies got a significantly higher portfolio performance than those with low scores. According to the details of the study, they measured actual investment returns over a four-year period and tied them to advisors’ competence in 70 different behaviors. “A key differentiator between financial advisors who help their clients achieve positive returns and those who help their clients achieve superior returns is moral and emotional competency.” Integrity–considered the hallmark of the morally intelligent person in which the advisor acts in line with principles and beliefs–had the strongest impact on helping clients achieve optimal returns. It is interesting to see that the higher the advisor’s moral competence the higher returns his client’s achieved. Doing the right thing pays off.

As a strong advocate for faith-based or values-based investing, I need very little convincing. I have seen the results firsthand and am a true believer that strong principles lead to better performance. I started a website in January at www.faithbasedinvestor.com with the intent of showing my exact moves for some of my faith-based and values based investing clients and the results have been crushing the stock market. By staying true to our principles we are getting better returns.

How do we do it? We look for companies that stay true to our beliefs. We look for companies making a positive difference in our society while avoiding companies morally polluting our culture. This difference of focusing on positive, well run companies with low debt, good sound business principles, and a passion to make a difference has led us to find companies we are Proud to Own. Though we are up nearly 40% this year (as of yesterday), it is the thought that the companies we select reflect our values and faith that means the most. Yes, achieving great returns is a reward in itself, but aligning our purpose and passion in life with our finances is as they say, “priceless”!