Rule #1 investing isn’t a value system, it’s an investing strategy, but it works better if you’re fighting for something you truly believe in.
It helps when you’re investing in something you admire, are in favor of, or want to promote in the world. The best fights and the best investments you’ll ever make are the ones you believe in.
The key to those kinds of investments, the investments you’ll be glad you made, is investing with integrity.
Integrity is rooted in the word ‘integrated’ which means something where all the parts fit together, where nothing is ‘disintegrated’, or sticking out, flying off, or marching to a different beat. A drum line is integrated. A marching band is integrated. Anything that works really well is integrated. A jet plane is massively integrated. It functions perfectly under great stress and strain because all the parts fit together perfectly.
A human being who has the quality we call “integrity” is integrated like a jet.
All the parts fit together. There is no part of him or her that is disharmonious with the other parts. He doesn’t teach his children to tell the truth and then lies to others. She doesn’t say fast food is bad and then takes the kids to McDonalds. He says he’ll be there at 8 and he’s there at 8.
They do what they say they’ll do.
Integrity is central to becoming a great Rule #1 investor.
Think about it like this:
Our best investments are investments in things we understand because we know the value.
We’re human. We understand things better that we are passionate about. We study them more, we get it better, we like the people who like the product, we understand the moat better.
Invest in Things You’re Passionate About
I’m passionate about motorcycles in general and Harleys in particular. I enjoy riding down the road with a group of guys on Harleys.
(If you’ve never ridden in a mob of 1,000 hogs, you should try it. There is something a bit religious about it.)
So, I understand Harley-Davidson better than many investors who just don’t get why HOG has a moat.
For me, riding a Harley is a part of who I am.
It’s part of the marching band I call “me.” It walks to the same beat as the rest of me. No one who knows me is surprised that I go hang out with the mob at Sturgis whenever I have the opportunity. For me, investing in HOG is integrated with who I am.
What if You Don’t Like The Company You’re Invested in?
Of course, you don’t have to ride a Harley to invest in HOG, but wouldn’t it be a bit weird if you hated motorcycles in general and Harley-Davidson in particular and you think they should to be banned from the road, yet you own stock in HOG?
That would be a disintegrated investment.
It’s putting your money to work in support of whatever it is that Harley-Davidson stands for, while at the same time hating what they stand for.
It’s as if you own the business that you’re trying to put out of business. That’s not just a lack of integrity, it’s not just hypocritical …
…It’s nuts, irrational, perhaps even insane. Yet investors who think of themselves as rational do it every day.
Put Your Money Where Your Heart is
Integrity for a Rule #1 investor is simply putting your money where your heart is.
I drink Coke, love Whole Foods, ride a Harley, shoot a Smith & Wesson, drive a Mercedes, a Ford, and a Toyota that use gas and diesel. I wear Ralph Lauren clothes, get electricity from a nuclear power plant delivered in copper wires to my door, buy investment analysis from Goldman, and bank with BB&T.
I appreciate and admire all the companies I buy products and services from and would be happy to own any or all of them.
Our personal values are incredibly important to successful investing. Almost no one talks about how to connect your values or your heart to where your money is going.
I think it is the most important vote in your life to invest your money into the things that you value and that you want to see in the world 20 years from now.
The Importance of Investing in What You Value
Remember that wherever you’re putting your money is what is going to grow in the world.
I know that you don’t think you’re going to change the world by investing your $1,000, $10,000 or even your million dollars given that the stock market is something like $15 trillion. Think about this, we as a group as small investors have 85% of the money in the stock market. The California Teacher’s Retirement Fund is one of the biggest investors in the world. All of those teachers have about $180 billion invested in the stock market. It’s unbelievable how powerful we can be when we vote our money in the right direction.
By making the decision to invest based on our personal values, we can change the world radically. Probably faster than any single thing we could do is to vote our money where our values are.
What Are Your Values?
How do you know what your values are? Your values are what you do. Your values are not what you say you’re going to do.
What you say you are going to do, are called our intentions. When we talk about our values we talk about the things that we are promising ourselves to do. We promise ourselves to be honest, we promise ourselves to buy companies that we really want to see in the world.
Don’t Let Someone Else Invest in Their Values
Let me explain something really important. If you’re investing in a mutual fund, you’re handing over your values to some fund manager who doesn’t have the same value set. He’s investing in his values and his values may be, “I’m going to invest in Altria because they make cigarettes, and maybe that’s a company that may go up in price, and maybe we can make some money.”
But, you’re making money doing something that maybe you’re telling your kids not to do and if you think about it, that makes you a hypocrite We don’t want to be hypocrites to our children right?
If we say, “Hey look, don’t be smoking, it’s not a good idea.” But we own a piece of the company that makes cigarettes, that’s an incredibly hypocritical point of view and our kids get tuned into that.
I also think that what goes around comes around and you get to get results from your karma. If your mutual fund manager is buying companies that you personally think are really bad, that’s kind of bad karma here.
For example, I think Whole Foods is a wonderful business. They’re out there changing the world and every time I can buy the company on sale I’m going to do it because I want to invest in my values and in what I want to see in the world in 20 years.
I encourage you to invest in what you love as well. The beauty of investing is that what you love and admire can be completely different, or even opposed to, what I love and admire and yet we are both investing with integrity.
We’re both voting with our money for what we want more of in the world and we’re both liable to make fewer mistakes in the process.
If you want to learn how to find, evaluate, and invest in Rule #1 approved companies that align with your values download my 5-Step Checklist for Picking Stocks. These 5 simple principles will lay the foundation – teaching you how to invest with certainty while taking less risk and making more money. And most importantly, how to ensure you are investing with integrity and finding companies you are proud of.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.