Surprising Ways Faith Affects Traders’ Behaviour
Have you ever paused before making an investment decision and thought a company makes some of its profits from activities that you don’t approve of? If so, then you are like many others who allow personal philosophies, religious beliefs, and moral considerations to influence their money-making decisions. Socially conscious investing has been around for many years. As long ago as the early 1900s, many were picking and choosing corporate stocks based on what companies did and how their board members behaved. But the 2020s have witnessed a huge increase in the practice, with not only individuals but also institutions basing decisions on the non-financial characteristics of corporations.
How can your faith affect what you put into your portfolio? Consider that many traders and investors select securities based on whether companies sell alcohol, ammunition, weapons, meat, pornography, tobacco products, and gambling-related services. In the digital age, when so many individuals create small portfolios and have vast databanks at their disposal, faith-based decision-making is becoming the norm. Here are a few of the ways personal religious outlooks affect financial choices.
Basic Outlook on Life
Even when faith is not a factor, many choose to avoid certain types of corporate securities because they don’t approve of what the organization does. Decide instead to invest in gold or other interests that are not attached to big business. That’s one reason a significant number of people never acquire shares of companies that produce guns, bullets, knives, and other weapons. Likewise, some consider it verboten to own stock in any business connected to the defense industry. If you consider yourself an advocate of non-violence, then that attitude can have a profound effect on what ends up in your portfolio.
Case Study: Islamic Accounts That Comply with Sharia Law
Muslim traders and investors seek brokers who can offer an Islamic forex account and other Sharia-compliant arrangements. According to the religion’s set of beliefs, it’s immoral to earn interest or engage in deceptive practices. That rules out taking a position in entities that lend money or offer services that are based on uncertain future events, like most conventional insurance contracts.
What’s the solution for Muslims who want to build retirement or other kinds of portfolios? The faithful can work with brokerage firms that offer special Islamic trading accounts that are fully compliant with Sharia law. In a similar way, some financial service providers offer other faith-based accounts that comply with Judaic rules, Catholic morality guidelines, Amish beliefs, etc. Sharia-based accounts were among the first religion-based arrangements from the major brokerage houses, but the concept of faith-specific financial services is spreading to be more inclusive.
Christians and Non-Violence
Millions of devout Christian’s refrain from doing business with corporations that sell or support any kind of violence. That includes the aforementioned weapons and ammunition but also products like boxing gloves, self-defense sprays, tactical knives, or any items related to fighting sports. There are entire strategies based on creating portfolios that encompass the entire non-violent lifestyle.
Buddhists and Right Livelihood
One of the tenets of Buddhism is called right livelihood. It refers to the idea of basing one’s career on jobs that do not cause harm to others or encourage violence in any way. Being a physician or house painter would fall under the right livelihood category, while working for a cannabis or alcohol producer would not. Buddhist organizations offer guidelines for responsible financial services that include lists of corporations that meet all the criteria for compliance. That way, individuals need not waste time screening companies. They can simply refer to an approved list and know they’re playing it safe by sticking with those companies.
Dietary Laws and Trading
While the importance of financial protection is always present regardless of faith, one of the universal restrictions related to moral or spiritual beliefs is connected to dietary rules. Conservative Muslims and Jews follow strict guidelines and avoid putting their capital into any organization that sells or produces restricted food or beverage items like pork, non-kosher drinks, certain kinds of alcohol, etc.
Tobacco, Alcohol, and Gambling
The big three products and services that millions of religious people avoid are tobacco, alcohol, and gambling items. The trio crosses many religious and cultural boundaries, as noted above, regarding both Jewish and Muslim views on intoxicants. Additionally, some Christian, Buddhist, Hindu, and Taoist groups refrain from dealing with any entity that earns a profit from the big three.
Interest and Profit
Amish adherents, Muslims, and some Christians forbid making money by charging interest on loans. Not only on a personal level but also in financial transactions, this restriction keeps large numbers of investors out of bank, insurance, real estate, and other kinds of securities. One concept that underlies the philosophy is that it’s wrong to earn a profit when you are in a superior, advantaged position to the other party. That means investing in any corporation that lends money or offers financial services connected to interest or non-sharing of risk is a no-no. Taken together, all the religious forms of making a living and building a portfolio are beginning to transform the brokerage field in several ways, the most obvious of which is offering special kinds of accounts for faith-based investing and trading.