Welcome to the 2nd post in this 4-part series, Getting Started in Impact Investing.For more tips on getting started in impact investing, check out this recent post.
Have you ever stopped to wonder why we invest? I did. Since the financial crisis in 2008, I have been reflecting upon why we invest in the first place and what it means to invest. I wondered why the activity of investing exists and why we need it. Whilst structures, forms, and products are useful for managing our investments, the most important first step as a new investor is to understand the motivations and purpose of investing.
My friend, Dougald Hine, gave a talk in 2010 on thefive purposes of money that inspired me to deepen my thinking about the motivations of investors. Dougald is an author and an entrepreneur and was named one of Britain’s 50 New Radicals in 2012 by Nesta, a not-for-profit charity in the UK that helps fund the development and realization of new ideas. The five purposes he identified are:
- Subsistence – a means to stay alive
- Security – a means to manage your future, to make the world less unpredictable
- Luxury – if something is a luxury, then you’re not dependent upon it
- Status – games by which people establish, hold onto, and change status
- Accumulation – the idea that more is in and of itself better
Dougald’s talk got me thinking, not about the purpose of investing, but rather the motivation of investors. I was more curious about exploring what drives a person to take action and invest.
Many of the investors I work with are motivated to “give back” in some way and help other people. However, I identified other motivations to expand this list.
Most impact investors want to do something good with their money, but unlike philanthropy and charitable donations, they also want the chance to get a financial return. There are other motivations for investing. I’ve compiled a list of the elevenmost typical motivations I’ve observed:
- Status: To be the person who discovers the next big thing, to be the talent-spotter.
- Power: To influence and have power over business decisions.
- Leadership: To empower and help others and provide vision and direction.
- Connection: To connect with other investors and be part of an investor community.
- Security: To create financial security through the accumulation of assets and reserves to manage an uncertain future.
- Future Consumption: To enable future consumption, through the accumulation of resources that grow, multiply and can be used in the future to purchase goods and services.
- Obsolescence: To prepare for products and services becoming no longer useful nor serving purpose.
- Innovation: To proactively develop products and services that are useful and serve us better in the future.
- Legacy: To provide for future generations.
- Making Decisions: To gather new information or create new tools tohelp us make decisions.
- Exchange: To provide a means of exchange in the form of money, shares, or other financial instruments.
Now that you are thinking about impact investing, take a moment to reflect on your reasons. What are your motivations for investing? Do your motivations fit into any of the categories above? I invite you to share your thoughts!
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More tips and tools for getting started in impact investing can be found inIntegrated Investing: Impact Investing with Head, Heart, Body, and Soul – available at all major online book retailers including Amazon.
FAQs
Investors are motivated by the potential for quick profits, but they also want to see that a company can expand its product line and revenue streams for enhanced future returns.
What is a famous quote about investing? ›
1. “An Investment in Knowledge Pays the Best Interest” (Benjamin Franklin) One of the Founding Fathers of the United States and a polymath known for his wisdom and wit, Benjamin Franklin provides a statement with several layers of meaning.
What is the main reason to invest? ›
Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value.
What are the motives for investment? ›
Safety, income, and capital gains are the big three objectives of investing but there are others that should be kept in mind as well.
What was Warren Buffett's motivational quote? ›
Be fearful when others are greedy. Be greedy when others are fearful.” Few quotes provide as much insight into the mind of Warren Buffet as this one. In this famous quote, Buffett reflects on an important fact: humans are naturally irrational.
What was Warren Buffett's famous quote? ›
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
How do I motivate myself to invest? ›
Understanding why you want to invest is one of the best ways to motivate, act, and stay on track with your investment goals. Finding your inner motivation to invest is not just about growing your wealth – it's a personal journey of aligning your portfolio with what you care about most in life.
Why do people choose investing instead of saving? ›
Investing products such as stocks can have much higher returns than savings accounts and CDs. Over time, the Standard & Poor's 500 stock index (S&P 500), has returned about 10 percent annually, though the return can fluctuate greatly in any given year. Investing products are generally very liquid.
Is investing actually worth it? ›
Good for long-term goals.
Investing can help you grow money over the long term, making it a strong option for funding expensive future goals, like retirement.
What are the three motives why people hold money? ›
In his “General Theory of Employment, Interest and Money” (Keynes 1936), Keynes distinguishes between three reasons for holding money: the transaction motive, the precautionary motive, and the speculative motive. Money held under the transaction motive are balances which are needed to carry out planned expenditure.
Key Takeaways. An investment strategy is a plan designed to help individual investors achieve their financial and investment goals. Your investment strategy depends on your personal circ*mstances, including your age, capital, risk tolerance, and goals.
What is investment quotes Elon Musk? ›
I always invest my own money in the companies that I create. I don't believe in the whole thing of just using other people's money. I don't think that's right. I'm not going to ask other people to invest in something if I'm not prepared to do so myself.
What is an inspiring quote for finance? ›
“Money is a terrible master but an excellent servant.”
His quote sums up the importance of making your money work for you. Barnum points out that, if all you do is work for money, it essentially becomes your master.
What is the most famous quote ever said? ›
“I have a dream.”
– Martin Luther King Jr.
Why is investment important quotes? ›
“In the long run, it's not just how much money you make that will determine your future prosperity. It's how much of that money you put to work by saving it and investing it.” “Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.”
Have you ever stopped to wonder why we invest? I did. Since the financial crisis in 2008, I have been reflecting upon why we invest in the first place and what it means to invest. I wondered why the activity of investing exists and why we need it. Whilst structures, forms, and products are useful for managing our investments, the most important first step as a new investor is to understand the motivations and purpose of investing.
