Warren Buffett of Berkshire Hathaway, famed investor and so-called “sage of Omaha,” writes a letter to his investors every year. His 1985 letter coined 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 when prices collapse or excitedly greedy when stock investing is easy. Adding the psychological expression of “acting greedy” or “acting fearful” gives foundation to the somewhat useless advice of “buy low, sell high.”
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; not accidentally, and certainly not by choice!
Rather than using Buffett’s strategy of vice investing, let us explore virtue investing. Eschewing vice altogether, Catholics should embrace the harder road of virtue, countering these evil instincts of fear and greed with the virtues of courage and prudence. Not only will countering our base instincts make us better investors, but these virtues also make us better Catholics. Simply put, courage foils fear, and prudence counters greed.
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. We will put ourselves in the place of Aristotle’s son and listen to his advice on the application of virtue to our choices, and specifically to our investment choices.
I started a financial advice company in 2005. After just getting on our feet, the Great Recession of 2008 hit full force, and I witnessed the markets declining by over 40 percent within a year. (This was the largest decline in price for the markets in a year, ever.) For investors, this was painful. It was easy to imagine our retirements evaporating and markets never recovering.
When we feel pain, we have a choice to make. We can remove whatever is causing this discomfort (sell everything!), or we can lean into it as a chance to grow both in virtue and in wealth. After all, the “pain” we feel when we work out at the gym is a pain we want, and the “pain” we feel when we lose money is something we want to avoid. However, both pains are instructive when we reframe them in the light of virtue.
People were losing their homes as sub-prime mortgages collapsed. People saw their 401(k) or IRA get cut in half. Every instinct was to sell and move away from equities. However, this event was one of the greatest investment buying opportunities in a generation, perhaps rivaled only by the “COVID collapse” of 2020. The pain we felt was a signal pointing to a future where the pain pays off. Leaning into this pain is an act of courage. Courage is a choice, and this this particular courageous choice resulted in tremendous investment returns in the years following 2008. In March of that year, the DOW was at about 6,300 points. Today, the DOW is over 40,000 points.
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 on to the virtue of generosity with our money. We grow in virtue twice! Prudence helps us build competence over time, and our motion toward generosity perfects this initial choice of virtue.
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). Gains and losses from investing will come, 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 only become better at acting greedy and fearful?
As Catholics, there is another aspect of courage when we invest that is not directly related to investment returns. We are called to be stewards of money, because it’s actually God’s money, and he entrusts it to us. If we invest in companies that might promise great returns but do so knowing that these companies produce pornography, provide abortion services, or employ slave labor, we profit from evil. The courageous Catholic investor chooses to own investments in alignment with our faith, even if we expect lower returns. Accepting the risk of lower financial returns means accepting the risk that some of what we want in our financial future might not happen. But it’s worth it! Our Lord tells us in Matthew 6:20-21, “Lay up for yourselves treasures in heaven, where neither moth nor rust consumes and where thieves do not break in and steal. For where your treasure is, there will your heart be also.”
The good news is that I’ve seen many investors choose virtue with their investments and be pleasantly surprised when returns come in as good or better than comparable “vice”-based options. We can choose virtue and be rewarded—if not here, then certainly in our life with God.
Greed and fear lead not to virtue, but to further sin. Warren Buffett’s investment decisions resulted in the good of tremendous wealth, but also a great evil: he recently bequeathed about $300 billion to Planned Parenthood, Catholics for Free Choice, NARAL, and many other pro-abortion organizations. No matter his wealth, he is hardly a man for Catholics to emulate in all things.
Let’s look at an example of greed potentially overwhelming our reason even today. We’ve witnessed the meteoric rise of Bitcoin. At the time of writing this article, the price of the currency is up over 50 percent in just a couple months! For those sitting on the sideline, watching others seemingly get rich, the instinct to jump in and buy is strong. But where does this instinct find its origin? Are we “applying right reason” to buying these coins, or is there a sense of greed in us, urging us to get rich? It’s easy to lie to ourselves. We can find someone online to justify our instinct and dress up our greed-founded opinions as “research,” but this is not a recipe for investment success. Rather is a form of gambling. Do crypto-currencies have a place in your portfolio? Perhaps. Is it easy to fall into the vice of greed and set reason aside when buying these coins? Absolutely.
Choosing virtue over vice is no promise of investment success—there are no promises 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 toward Christ. 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 not the virtues of faith, hope, and charity compounding within us?
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.”
St. Joseph of Arimathea, ora pro nobis.