What Is a Stock? … and the Responsibilities of Ownership

by Cassandra Laymon, CFP®, MBA

“What is a stock?” If you have even a minor understanding of investing, you would likely answer, “a share of a company.” And you would be right. What exactly does that mean?  Very few people take the time to reflect on what it means to be a stock owner and the responsibilities that come with it.

First, for those readers who don’t understand what a stock is, let me explain.  Let’s say you own your own company – a bakery – that you run out of your home. You provide cupcakes and cakes for parties for friends and family. The word spreads about your delicious desserts, and you realize that you can no longer operate out of your kitchen and accommodate increasingly larger catering orders that are coming in.  You really need a commercial kitchen, but you don’t have the money to set it up.

What would you do to raise the funds?  Let’s say three of your friends say, “We really believe in you, and your business. We’ll give you the money to expand, and in return you will give us piece of the company and pay us a percentage of the profits.” Pretty straight forward, right? That’s stock ownership!  A century ago when you were a stock owner, you likely knew the owner of the company, and you were very clear about the nature of the business you were investing in. In this case, cupcakes.

As a stock owner, you make a profit from the sales of the company. The owners will take your money to do more of what they are already doing. It makes sense to only invest in business practices you agree with.

Fast forward to the present. You probably don’t know what you are investing in. It could be pornography, or addictive substances or abortion industry or companies that support Planned Parenthood.  If you knew that is what you were investing in, you would likely want no part of it.  But today there are three reasons that this doesn’t seem to bother many investors:

1.     Many people have fully delegated their investing choices to someone else, such as a financial advisor.

2.     Many companies have multiple lines of business and subsidiaries, and we don’t even know what they are doing.

3.     Complex investments like mutual funds and ETF’s make it more difficult to know what you are actually investing in.

I find it interesting that certain factions of people take their ownership responsibilities very seriously.  Animal rights activists and environmentalists, to name a few. How do you think Socially Responsible Investing got to be so successful?  The people that believe in were willing to vote with their dollars. They decided not to invest in companies that went against their beliefs. For example, I have a good friend who is an avid animal lover.  When looking at investments she adamantly declared that she would not invest one penny in a company that uses animal testing of any kind.

How many of us Christians are willing to do that? Are we willing to invest according to biblical principles to affect a change in business practices? Often my conversations with Christian financial advisors get side tracked because they are focused on perfection.  Instead of starting with big issues like abortion, pornography, and addictions, they say things like, “What about sugar and promoting obesity?” While I agree that sugar is an addiction, I am unwilling to let that derail me from screening out the more obvious issues mentioned above.

How about you? What are you investing in? I would encourage you to take some time this week to pray about this issue. Ask God how he would have you wisely steward all that which you’ve been given – not just in terms of savings, giving and lifestyle, but also in the area of investing.

 

Financial Planning & Investment Advisory services offered through Beacon Wealth Consultants, Inc.