We tend to approach our investment decisions with far less understanding, emotional intelligence, and maturity than we apply in other areas of life. At times, we fail to recognize that investing is relational. 

Most people over the age of four have already realized that they can’t approach relationships in a purely selfish manner and experience the quality of connection they desire with other humans (caregivers, siblings, friends, etc.). Certainly, we don’t approach marriage, parenting, or our vocation thinking only of ourselves. As we mature, we come to understand that in all relationships, success looks like a mutual benefit…a win-win. Why then do we struggle to see this same basic principle in our investment choices?

We struggle to see the relational nature of investing because it's complicated. Before the development of exchanges or capital markets, investing was directly and obviously relational. An aspiring business owner would tap family, friends, or neighbors to help gather capital to launch or scale a business. Potential investors considered what they knew of the entrepreneur’s character together with the attractiveness of the business concept and weighed the investment opportunity. If an investment was made, it would instantly feel like a some version of a partnership. 

However, as the capital markets have developed, and the financial services and wealth management industries have grown, the number of layers between an investor and the businesses in which they invest has quickly increased. It has become indirect, impersonal, and purely transactional rather than relational.

There may be a direct relationship between the investor and a financial advisor or family office that can be very personal. But then the advisor may deploy the investors capital using managed money, which introduces an indirect relationship with a portfolio manager. That portfolio manager relies on various analysts and research providers to select securities; add a few more links in the chain. Factor in the market itself, with its tendency towards fear and greed herd mentality, and the number of layers between the investor and businesses is substantial, as is the degree of complexity. It’s no wonder that investing feels largely disconnected from the principles that typically govern our personal relationships.

It's been said the God speaks most often through the conscience or heart. Our hearts often lead us to relational wisdom. They help us cultivate empathy and put ourselves into someone else’s shoes. They show us right and wrong. How much richer could our investing become if we allowed our hearts a seat at the table.

When considering an investment, we tend to first ask questions like these:

  • “How much return can I expect?”
  • “What’s the least amount of risk I’d need to take to get that return?”
  • “How long will my capital be locked up?”
  • “What are the fees?”

These questions are important. They sum up what is essentially the head approach to investing. We should apply our logic and intellect to the investment process.

But we often forget to ask questions like these:

  • “What are the impacts of this investment on other connected parties (or stakeholders)?”
  • “What is the purpose of the investment?”
  • “With this bucket of capital, do I want to prioritize profit or positive impact?”
  • “Is this investment a practical way for me to show love to my neighbor?”
  • “Does this investment add meaning to my money?”
  • “Am I joyful or passionate about how I invest?”

These questions represent the heart side of investing. What if we gave our hearts a seat at the table too?

Published on April 04 2024