Here's to a Sustainable 2019!

The stock market was not kind to investors last year. In fact, it was the worst year since the 2008 Financial Crisis. Fortunately, 2019 is off to a much better start! The market started rallying the day before New Years and hasn’t looked back.

Last year the S&P 500 was down about 6% and came within a hair of reaching a technical bear market, which is defined as a 20% decline from the recent high. The tech-heavy Nasdaq was firmly in bear market territory, led by declines in Amazon and Apple.

Diversification and Sustainable Investing helped

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The silver lining is that the Impact Fiduciary’s portfolios have fared much better than the S&P 500 over the past few months due to a high level of diversification and a more evenly weighted approach across sectors. On a relative basis, exposure to gold and fixed income helped to minimize the damage. 

The focus on sustainable investing contributed nicely to the performance, since we have no exposure to the fossil fuel–dominated energy sector, which is a huge chunk of the market and plays a major role in almost all mutual funds and index funds. Oil, the dominant industry in the energy sector, was pummeled this past year. 

Oil Gets Crushed

The price of a barrel of oil climbed throughout most of the year peaking in October, then falling 40% from the high point. This dragged down the fossil fuel based energy sector, which ended the year as the worst-performing sector, down 20%. Surprisingly, the only two positive sectors in 2018 were healthcare and utilities.

The energy sector, led by Exxon Mobil and Chevron, has been quietly getting crushed over the past decade. More and more institutions, individuals and countries are divesting from fossil fuel companies as they question where their money is invested.

In fact the energy sector has been the worst performing sector not only this past year but the last five and ten years. This trend is unlikely to change. My view is that it will most likely accelerate into the next decade.

Investing 101

I think it’s important to occasionally revisit the fundamentals of what you are actually investing your savings in from time to time. It’s easy to think of the market as this abstract thing that goes up and down every day. In reality, the market is just a composite of publicly traded businesses. 

The businesses that you own in your portfolio are typically run by very driven, intelligent and talented people. The employees who go to work at these companies have a fiduciary duty to maximize your value as a shareholder and are typically well incentivized.

In other words, they work for you, the owner of the shares. All companies are trying to grow their business and maximize profits. This is why it’s so important to invest in companies that are mission driven and align with your values.

For example, if you would prefer that the world end its addiction to oil in order to save the planet, you ought to invest in a solar company, not an oil company. Both the solar company and oil company are trying to maximize shareholder value, but with vastly different consequences to the planet.

Sustainable Investing Just Makes Sense

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Sustainable investing helps you be more intentional with your hard-earned dollars by investing in companies whose mission is to actually improve people’s lives and make the world a better place. This is the opposite of blindly investing in negative industries like fossil fuels, guns, private prisons, opioid manufacturers and big tobacco. 

Aside from the sheer importance of supporting mission-driven companies, there is a growing body of evidence suggesting that sustainable investing leads to better performance. This really makes it a win-win!

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My Goals In 2019

Unfortunately we can’t control what the market does but we can try to get the highest return on our life. Here are some of my personal goals for 2019. Maybe by sharing them publicly it will make me more accountable?

1) Focus on being healthier. Eat more veggies and less carbs while exercising at least five times a week. 

2) Maximize my positive impact on my client’s financial lives.

3) Practice mindfulness by meditating. The goal here is to have more clarity throughout the day and less internal distractions. I’m taking the Waking Up Course by Sam Harris via an app on my iPhone. So far it has surprisingly made a major difference.

4) Spend more quality time with friends and family. This probably has the highest return on investment.

5) Live a more sustainable life. Use less stuff and lower my carbon footprint. This is always a work in progress! 

I could list more goals but figured this would be a good place to stop. I’d love to hear about your goals. If you’re open to sharing feel free to email them to me at patrick.dinan@impactfiduciary.com.

My wife and I just watched Minimalism on Netflix, which I highly recommend. This is my favorite quote from the documentary: “Love people; use things. The opposite never works.” Great advice to live by in 2019!

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Patrick Dinan, and all rights are reserved.