Picking an Investment Strategy Part I

If I had to pick the easiest investment strategy that matches my investment laziness to maximize game time,  I would go with being a Boglehead. Keep it simple with a few passively managed broad Vanguard index funds.  Jack Bogle was a saint in an industry that was about scraping fees off the client. But can I really be a buy-and-hold kind of investor that regularly pour my hard earned money into broad indiscriminate swathes of the stock market?

Before all else though, I find that I have to answer for myself two questions. First, what kind of capitalist am I? Inconvenient to the family purse, I am a deeply ambivalent one.  I'm hugely grateful my family immigrated to the most economically prosperous nation that is the United States. Even as a successful beneficiary of the capitalist system to which I owe my semi-cushy existence, I harbor all kinds of misgivings about our consumer driven economy.  It's hard to close one's eyes to the steep cost wrought by this economic progress; improving our material existence cost us the degradation of the health of the planet, community, society and the individual.

In buying recommended index funds like the S&P 500, I would be supporting outright corporate villains of Philip Morris, Wells Fargo, Halliburton and others. Too bad I can't add Activision Blizzard to this roster as they are just one greedy anti-consumer corporation out of many.  Many large cap corporations have practices that outright trample my values.   I don't want humans to glug Coke or sodas daily and shop their hard earned money away in a consumer frenzy.  I do hold a small percentage of my holdings in broad index funds but the moral compromise makes me weary and wanting an alternative.  In even pondering this moral conundrum,  I am fully aware I have the luxury to do so because my belly is full with enough coins fattening my purse.  When I am old, decrepit, and in desperate need of more money for cancer treatment, would I think my young self just an idealistic ninny that should have plugged my accounts into the general stock market like everybody else?

Did I really slaughter 150+ men for the right to fish?
Curse you Rockstar!!! 

In real life, I do my best not to fall into the "end justifies the means" trap yet I willingly do so playing combat based RPG games.   Eventhough I really hate the mindless killing of disposable humans enemies and animals in these games,  I routinely perform acts of reprehensible violence to unlock exploration of the open game world.  Evil Rockstar Games is the absolute worst forcing you into morally contemptible acts at every story turn and they  locked fishing in Red Dead Redemption 2 behind a barricade of unskippable violent gang work.  But I lurve just lurve fishing mini-games in open world games and I will sacrifice my firstborn to unlock it.   I was in a bloody shootout killing all the males in the small town of Strawberry then I beat up a dying tubercular man to collect few measly dollars worth of debts. But totally worth it. The fishing in RDR2 with the PS4 Dualshock controllers is one of the most immersive fishing game experiences out there.  I fully accept engaging in the violent nature of the combat based RPG to unlock what I truly want.  However compromises in real life capitalism and gaming are two worlds apart.

The only segment of the investment arena my stubborn morals and I can agree on is municipal bonds/infrastructure/utilities/real estate. Yup,  working roads, bridges, sewers, power and water plants, hospitals and schools are good and necessary things for the world and I have about 20% allocated. What about Socially Responsible Investing (SRI) funds you ask? I looked at ESGV- Vanguard ETF that selects stocks based on ESG(environmental, social, and corporate governance) criteria.  Off the bat I have objections on the top holdings:

• Facebook - Objections much too complicated to express here beyond the Cambridge Analytica fiasco.
• Coca Cola/PepsiCo/McDonalds - I object not just for propagating a global diabesity epidemic but I see Diet Coke as an evil substance that is chipping away health of some of my most cherished friends.  I just don't know how these companies wiggled into the SRI circuit besides corporate whitewashing.
• Microsoft (3.5%) - if sucking out your soul and humanity through operating system upgrade bugs and mind numbing support is a crime, either I should boycott MSFT or at least claw out some compensation through investment. Now as I write the last sentence I have changed my mind about objecting to Microsoft. I have mainly PC based beefy machines at home since Linux gaming sucks and consoles are too limiting.  DirectX did allow for the golden age of PC gaming.
• AT&T -  I object to anti-competitive practices of which our local ISP is a victim but their debt load is too much for a financial conservative like me.
• Apple - I've enthusiastically bought 6 iPads and a MacBook in the past. But now I so disagree with their anti-consumer practices I never want to buy another Apple product again (except that I have spent so much on IOS apps and games that vendor lock in will probably hit me hard). Philosophically I don't like supporting closed systems in tech and Sony Playstation is my other exception.
• DowDuPont

At this point, the reader may be exasperatedly wondering- does this picky fool want to make money or not! Is it so bad I don't want my retirement comfort to rest on the bones of dead diabetics and a dying planet.   It's clear I would have to do deeper searching for a better aligned fund. Capital flow is complex and even if I hold money in a savings account, there's no saying that money isn't being lent out by the bank to objectionable entities.  Second hand evil is all around us with sweatshops and inhuman labor practices behind many of our consumer purchases but if I explicitly don't support a business, I can't blithely invest directly in their equities.  I could think up a compromise where the objectionable components are less than 5% of the holdings where a broad index should be acceptable.

To buy U.S. equity funds, you are betting long on the perpetual American expansion.  Second big question is do I believe in American exceptionalism and this prosperity will continue throughout my lifetime? The American retirement mantra of almost every financial advisor is to invest invest invest in the stock market to supercharge and compound your savings (or you will be eating dog food in a cardboard box).  You certainly don't hear this hard sell to retirees in Japan, France, Germany, most of Africa and South America. They deem the stock market as a high risk investment to be approached with utmost caution.  I do think the constant inflow of diverse immigration, stable government, and particularly the ready flow of capital in the last few decades has provided an unparalleled environment for innovation in the States.  However the U.S. faces massive structural problems of ballooning national debt and unfunded liabilities for Social Security and Medicaid exacerbated by a declining population growth rate.  (Huge shout out to all the American moms for birthing and rearing future taxpayers!) But being the world reserve currency gives our country huge wiggle room but I believe the next 30 years will not be a ready repeat of the economic miracle of the last 30 and that equities represent a much higher risk than the financial industry lets on.

One of my favorite VR titles is Fallout 4 VR which puts you in a post nuclear wasteland of Massachusetts.  In this alternate history, China and the United States fight over remaining energy resources leading to an all out nuclear war in 2077. The Fallout lore was created before fracking and the oil glut we see now.   At first, it was depressing to wander this bombed out wreck of a land with most of humanity wiped out and only a handful of survivors scraping out a living in a brutal Max Max style end game.  It only took me a few hours to see the bright side in rebuilding the future, realize how rich this world was in free resources in abandoned factories, schools, hospitals- that is if you have space in your inventory to lug it away.  While I don't believe nuclear annihilation is in our future, markets will crater and rise again repeatedly. You can be wiped out if you simply didn't have 10 or 20 or 30 years to recover as did many in 2008.  I don't want to blindly follow the current dictum that investing majority of my assets in the stock market for my age group is an absolute MUST for retirement without having done my due diligence.

Out of the different schools of investing, Ray Dalio has a contrarian voice on the risk of equities. In his bond heavy All Weather Portfolio, stocks get a meager 30% allocation due to the volatility. He runs Bridgewater, the largest hedge fund in the world and he did personally make $2 Billion last year so he's not some obscure permabear.  I'm relieved equity heavy mix is not the only way forward to match market returns. However his All Weather Portfolio counterbalances the remaining 15% in gold and commodities, something more difficult for me to allocate.

In writing this post, I realize I have to some serious leg work to form my investment strategy. I just can't go with the flow of easy index funds quite yet.  In our information rich society, ignorance becomes a moral choice. But humans are also masterful at suppressing and forgetting uncomfortable facts.  Drats, am I just another high minded hypocrite that's going to opt for convenience and corporate profits anyway. I know plenty of kind and caring souls that own S&P 500 index funds that somehow have reconciled the dark side of capitalism. All of us have to find our own way.