Growing in Virtue Makes Us Better Investors

Warren Buffett of Berkshire Hathaway, famed investor and so-called “sage of Omaha”, writes a letter to his investors every year. In 1985, he penned a letter titled “Being greedy when others are fearful.” In this letter, Buffett penned the now commonly known investment quote: “We simply attempt to be fearful when others are greedy and to be greedy when others are fearful.”

Buffett embraced the budding concept of “behavioral finance”; the idea that our psychological traits and behaviors impact our investment choices. He was correct in this regard: Simply telling people to “buy low and sell high” doesn’t work well when people are petrified in fear when prices collapse or excitedly greedy when stock investing is easy. Adding the psychological expression of “acting greedy” or “acting fearfully” gives foundation to the somewhat useless advice of “buy low sell high”.

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However, is hopping between the vices of fear and greed over and over in one’s investing life a recipe for success? How often are we told “Be not afraid!” by our Lord and his messengers? Vice is hardly the choice for any Christian. Should we embrace fear and greed repeatedly, we will become fearful and greedy people. Instead, I propose, we should not be greedy or fearful; either accidentally, and certainly not by choice!

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Rather than using Buffett’s strategy of vice investing, let us explore virtue investing. Eschewing vice altogether, us Catholics should embrace the harder road of virtue, countering these evil instincts of fear and greed with virtues of courage and prudence. Not only will countering these base instincts extolled by Buffett make us better investors, but these virtues also make us better Catholics. Simply put: Courage foils fear, and prudence counters greed.

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Before we tread further, let us define terms. Courage is the “mean between fear and foolhardiness” and prudence is the “application of right reason”. Aristotle uses these definitions in his Nicomachean Ethics, a work probably dedicated to his son. For our purposes, we will be Aristotle’s son and hear his advice on the application of virtue to our choices, but specifically to our investment choices.

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In the moment of the investment decision, the virtues of courage and prudence serve us well. But further, generosity is like prudence, as it too thwarts greed and can be practiced long after the moment of the trade. So, we act prudently, countering greed, and then move onto the virtue of generosity with our money. We grow in virtue twice! Our prudence is a practice in which we gain competency over time, and our motion towards generosity perfects this initial choice of virtue.

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Courage serves as a spark for virtue generally, but specifically in burning away fearful impulses. Courage moves us to Faith, a higher virtue, and like how prudence can birth generosity, our repeated acts of courage increase our Faith. We trust God in everything because we have faith in His promises to us (and because He places charity in us). We trust that all our actions bring about our good and the good of others as God “works for the good of those who love Him...” (Rom. 8:28)

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Gains and losses from investing are inevitable, but application of virtue to our investment choices is a more important gain, and never a loss. For what value is there in our investment returns if we become better at acting greedy and fearful?

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Greed and fear do not lead to virtue, but further sin. While I do not know if Buffett applies his “fear/greed” strategy with his choices (perhaps it was only his rhetorical flourish?), but the fruits of his investment decisions resulted in tremendous wealth and something much worse: Buffett recently bequeathed about $300 billion to Planned Parenthood, Catholics for Free Choice, NARAL, and many other pro-abortion organizations, hardly marking this investor a man for Catholics to emulate.

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Choosing virtue over vice is no promise of investment success, but it is a promise of sanctification. In my years helping families and institutions invest with prudence and courage, I have yet to see the choice of virtue do anything but move people towards Christ. Jesus warned us of focusing upon our wealth accumulation: “Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasure in heaven, where neither moth nor rust destroys, and where thieves do not break in or steal...” (Matt. 6:19-20) Let us prudently invest our money while we focus on the more important “investment return” of growth in virtue. What is the truly “long term investment” if it is not the virtues of Faith, Hope, and Charity compounding within us?

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Let us imitate the Saints and our Lord in courage, prudence, generosity, and faith, and not emulate men who know nothing of “treasure in heaven”.

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St. Joseph of Arimathea, ora pro nobis.