2 Industries You Should Never Invest In

One of the more controversial topics in the investing world is that of "ethical" investing.

While the ultimate purpose of investing and trading is to increase our personal wealth and standard of living, we also want to be able to look ourselves in the mirror at the end of the day.

The debate truly runs the entire spectrum.

There are some investors who have no moral qualms whatsoever about investing in any company so long as they can make money.

And at the opposite end of the spectrum, there are those who act more like moral police than actual investors - they can tell you every real and perceived wrong that a company or industry is guilty of, or ever has been guilty of.

But what happens if you have no qualms about owning a particular business, but you go to a financial website and read comments by other posters whose moral outrage makes you question your own lack thereof?

The Ethical Investor's Code

Well, I have a suggestion that I believe finds that ideal balance between maintaining your own personal ethics, supporting your continued success as an investor, and helping you to ignore (or respond to) the full time haters.

I propose a three part solution:

#1. We all allow ourselves two industries to avoid investing in on moral or ethical grounds and one specific business to actively hate.

#2. We only get to indulge our hate of a business or disdain of an industry in no more than one conversation per calendar month (and if we want to avoid wasting our time and that of others altogether, we probably won't engage in any of those conversations in the first place).

#3. We don't disparage, criticize, or judge anyone else who fails to share our moral outrage.

Now, this isn't so much about controlling our own behavior.

It's about proactively determining a set of principles - a code to live by, if you will - such that anytime we come across someone else violating these principles, we'll have something specific to refer to when telling them to put a sock in it.

Because, at the end of the day, people have to decide whether they're investors or blamers, capitalists or moralists.

Capitalism vs. Complaining

Every industry and business has its detractors:

Tobacco
Brewers and Distillers
Pharmaceuticals
Fast Food
Carbonated Beverage Companies
Snack Food Companies
Pawn Store/Payday Loans
Big Oil
Heartless Insurance Companies
Bailed Out Financial Institutions
Auto Manufacturers who knew years before they had to publicly acknowledge it and correct it that there was a problem with an ignition switch or an accelerator
Companies that offshore their operations to avoid taxes
Companies that outsource jobs
Companies that became so large and successful that they destroyed thousands of small, local, mom and pop retailers
Companies whose politics we disagree with
And More . . .

Capitalism has its shortcomings, certainly.

But I've yet to see a better system proposed to efficiently distribute goods and services, rapidly improve technology, and promote personal responsibility and self-improvement.

The Two Industries You Should Never Investing In

So you can probably guess where I'm going with this.

The two industries you should never invest in are the two industries where you do have sincere ethical concerns (if, in fact, you do).

Everything else is fair game and you shouldn't be made to feel guilty for owning real businesses with commercial operations in the real world.

For me, I don't invest in tobacco or in privatized prisons.

Both my grandfathers died of lung cancer in their 60s, and I've seen others unable to beat their addiction to the very real detriment of their lives.

And there's just something about profiting from human incarceration that I just can't accept.

Now, those are my personal ethics, but I don't try to impose them on others and I certainly don't judge anyone for not sharing them.

And, you know what?

That in itself gives me (and you) a certain moral right to tell others who violate our own Ethical Investor's Code to pipe down.

The Flip Side

On the flip side of things, the great advantage of adding conservative, value investing-oriented option trading to your portfolio is that there's never a reason to be tempted to invest in a stock you have genuine ethical concerns about but where you know you can make great returns.

Leveraged Investing is about using options to systematically and structurally stack the deck in your favor so that there's always "easier ways to make money" than to invest in a business that gives you personal pause.

Follow @LeveragedInvest