Rethinking Your 401k: Toward a Moral Analysis of Investing

By Jordan Stewart

Modern Christians are not habituated to think about money theologically. Aside from homilies kickstarting the financial giving campaign of the year, most preachers tip-toe their way around the subject of money. Tithing, evidently the only non-taboo topic related to money, is usually presented as a scriptural command and nothing more. The widespread popularity of Dave Ramsey’s “Financial Peace” program, notwithstanding the biblical gloss he gives for each stage of the process, points to the fact that, when it comes to money matters, Christians today have more in common with non-Christians than they do with Christians of the early Church or Middle Ages. Financial wisdom has been secularized. I am not saying that such a program is fiscally unsound – far from it. But I am calling into question the universal modern financial creed: that the only measure of monetary advice is whether it leads to wealth and profit. We have lost a distinctly Christian understanding of money and are ignorant of the moral and theological implications of its use. This is a grievous predicament, given that money is such a central feature of any society and thus carries enormous potential to do good or evil.

Though not a full theological treatment of money, what follows is an attempt to think about money not through a lens of profit, but from a moral theological perspective. To be clear, the monetary analysis I propose here is radical in the sense that moral concerns are elevated above economic concerns, and thus my conclusions run counter to prevailing financial wisdom. Specifically, I develop some general principles for virtuous investing by analyzing the key moral aspects of the action itself and by considering how particular investments could entail different levels of cooperation with evil. While much of the ensuing discussion will involve the most common type of investment today — buying stock — the same general principles hold for any other type of investment as well.

Buying stock is a matter of moral and theological import. Although some might uncritically assume that Christianity is only concerned with salvation, Catholic moral theology holds that every action is a moral action (Westberg, 31). This is because actions are oriented towards ends, and these ends are either in conformity with reason and God’s will or they are not (Aquinas, Summa II-1, Q.18, A.9). Accordingly, some actions like fraud and adultery are intrinsically evil because their objective ends — that is, what any person who willingly commits the act intends — always violate God’s will. Such actions or moral objects are sinful by nature. Others, like praying or giving alms, are good by nature. But, in cases where the moral object seems indifferent, like exercising or eating, we must take into account the purpose of the individual moral agent. The final end of man is perfect happiness in God, and so all actions and their goals can be measured according to whether they ultimately contribute to this end or not. Furthermore, sometimes an otherwise good action can be flawed if performed with the wrong personal motives or in the wrong circumstances, like charitable giving out of self-conceit or with money already owed to someone else. From this basic outline it is clear that for any given action to be morally good, the agent must perform the right sort of action for a virtuous end under appropriate conditions (Westberg, 58). In short, an investment’s moral goodness depends upon its object, end, and circumstances.

To analyze an investment, we must clearly define its object and end, that is, what is specifically happening in this action, and what anyone performing this action intends to accomplish. Perhaps the most common way people think about investing nowadays is putting money into a company for the purpose of making a profit — buying stock at a low price in order to sell the share for a higher price. In this way, an investment is considered successful if it yields a large return. Can we say at this point that the object and end described constitute a morally good type of action, or is it already flawed? Though Wall Street did not exist when St. Thomas wrote the Summa, he does treat the action of “trading” — using money for the purpose of making more money. On trading, Aquinas says, “Considered in itself, it satisfies the greed for gain, which knows no limit and tends to infinity,” and it has “a certain debasement attaching thereunto, insofar as, by its very nature, it does not imply a virtuous or necessary end” (Summa II-II, Q.77, A.4). Despite these less-than-flattering words, Aquinas does not hold that the act is necessarily sinful, only that it is not intrinsically virtuous and can easily tend towards avarice. Thus, considered theoretically and despite these hazards, we could risk oversimplification and say that investing is per se indifferent — neither innately good or evil — as a moral object. But any particular act of investing is never morally indifferent because all actions are directed at some end, which is always either good or bad (Aquinas, Summa II-1, Q.18, A.9). Hence, any trade takes its goodness or sinfulness from the goodness or sinfulness of the particular end towards which it is directed (Aquinas, Summa II-II, Q.77, A.4). Thus, the investor must have a specific good — by which he means a moral good — in mind in order to justify a profit-seeking investment. Providing for determined needs of dependents, lifting up the poor, maintaining properties, and financing community needs would be good reasons for pursuing gain through trading (cf. Aquinas, Summa II-II, Q.77, A.4). However, this is perhaps more challenging than it initially appears. Flipping shares to stockpile money for some vague reason would not, I think, fulfill Aquinas’ criteria. In this analysis, investing cannot be an end unto itself. Indeed, using investments to amass wealth beyond what is necessary to live in accordance with one’s station just because one can is sinful — it is quite literally the definition of covetousness (Aquinas, Summa II-II, Q.118, A.1).

Besides the moral agent’s motivation for buying stock, we must also take into account the nature of the investment itself to determine its goodness. Buying stock presupposes a relationship: money is being given to a particular company for its use. And, if the objective end for investing (i.e. profit) is directly linked with a business’ growth, this entails that the investor is complicit with the particular goals of the business and approves of the way it accomplishes these goals for as long as he or she holds its stock. Clearly, then, we must consider the moral implications of buying stock in companies involved in vicious practices. In moral theological terms, this would constitute an analysis of cooperation with evil: “the free and knowing assistance of an individual or institution in an immoral act performed by another individual or institution” (NCBC, “Cooperation with Evil,” 1). Every investment thus entails at least material cooperation, because a person provides money — the material — to the business for its activities. It is not difficult to imagine circumstances which make the action of investing evil, for instance putting money into a pornography company. Such an action would be formal cooperation with evil, because in order for the business to increase the profit of the investment, the investor must will for them to create harmful products and for others to use them (NCBC, “Cooperation with Evil,” 1). But what about a less clear case, like buying stock in a pharmaceutical company, which makes one abortifacient drug among dozens of others? There are a few things to consider here. First, the investor might not will that anyone buys the abortifacient product and still desire to profit through the company’s other sales. Second, the degree of causal separation between the investor’s money and the manufacturing of that drug is likely significant. In addition, an individual’s decision to buy stock probably has a negligible impact on the business’ ability to make the drug, especially if it is a large corporation. These considerations suggest that this would be an instance of remote material cooperation, which could make the investment morally licit if there is a reasonably proportionate good in view (NCBC, “Cooperation with Evil,” 1). However, the gravity of the evil involved is a key variable in this judgment, and in cases like this one that involve the taking of human life, the good must obviously be proportionately significant.

The relationship between the investor and a business is not the only relationship involved in the action of buying stock. Businesses serve communities, and the capital given to a business through investments empowers their operations in those communities. We must then consider how an investment contributes to or threatens the common good. In any given investment, are our communities (and not just the numbers in our investment account) better off with that corporation’s increased power? This question in the extreme cases is straightforward to answer, but it is more often than not much less clear. It is complicated because, most of the time, the local communities in which we live and the community served by a company whose stock we hold do not neatly overlap. The globalized financial market means that there are even more layers to consider when investing. The ripple effect of one investment touches countless lives across the world, even if it is impossible to say precisely in what way and how significantly. This makes judgments about proportional reasons for material cooperation with evil difficult to determine with any confidence when investing in something like a global tech company. However, there are still some inferences we can draw from this. First, the more removed an investor is from the company, the more personal gain for gain’s sake is likely to be the motivation for the venture, which is not a good moral reason for investment. This suggests that local investments are naturally better, because the moral agent has more knowledge of the situation and can better approximate the goodness of their action. Furthermore, an individual’s good and the common good of the place in which they live are more closely connected, so an investor is more likely to be interested in the venture for reasons beyond personal gain and has more ability to effect good in their local community versus in the global market.

All of the above applies to the action of buying an individual stock, but Americans more commonly invest through a mutual fund or an index fund, which are bundles of individual stocks in a variety of industries. Indeed, many have as a part of their employer-offered benefits package a 401k account managed by an independent financial firm, usually comprising a few different mutual funds. The employee typically elects to allocate a percentage of his or her paycheck to fund this account automatically, which is managed by a professional investor to maximize profits and manage risk. What can we say about this from a moral theological perspective? This scenario is accurately described as blind investing – passively buying shares of companies without knowing what they do or whom they will affect. Right away it is obvious that there is a moral defect in this action, since it fails to regard the implications and relationships entailed by the action itself — a clear case of the sin of negligence (Aquinas, Summa II-II, Q.54, A.1). Indeed, through one of these accounts, a person is invested in hundreds of companies, many of which he or she would not recognize if handed a list. Although this means such a small portion of that person’s money is in any individual company that the impact is significantly watered-down, one could unknowingly assist real evil. Furthermore, such a scattershot method of investing all but confirms that the goal of the investment is vicious — personal profit apart from any analysis of the common good. Lastly, by opting for such a mode of investment a person minimizes the clear good one can do in their own local community, and instead ties up money in the global economy. Covetousness, lest we forget, is a vice opposed not primarily to the fleshly virtue of temperance, but to the social virtue of justice (Aquinas, Summa, II-II Q.118, A.3).

From this sketch, we can affirm the following guiding principles for good investments: 1) investments must be undertaken to profit for a specific moral good; 2) investments must not be in a business engaged in immoral activities unless there is a proportionally good reason; 3) investments must be done with full knowledge of the circumstances of the action; and 4) the most unambiguously good and just investments involve local companies because the goods of all three parties (i.e. investor, business, and community) are most closely intertwined. These principles counteract the inherent tendency of investing to become vicious through covetousness and negligence. Of the countless questions raised by such an analysis, there are two which are particularly pressing. Firstly, does retirement as we typically think of it constitute a morally good end for investing? And secondly, is it immoral to invest in giants like Amazon, Alphabet, Facebook, and Microsoft as standalone stocks or through the S&P 500, given the lack of knowledge over the way these corporations are run, the larger goals of these companies, the negligible good impact of our money on their operations, and questions of justice and wealth inequality? To answer such questions, we would need to draw deeply from Scripture and Tradition to develop a robust theology of money, and to consider current theological reflections on the conditions and systems of contemporary Western society. However, what this outline makes clear is that investing is laborious for the Christian. Mindlessly outsourcing our power to do good by giving money to financial experts, simply in order to maximize profit by binding up our wealth to the powers of this world, is not an option for the person seeking virtue. The moral life takes diligence, prayer, and prudence. It should not surprise Christians that good investing — by which I mean morally good investing — takes the same.

Jordan Stewart teaches history and Latin at the Geneva School in Winter Park, Florida and is an MTS student at Nashotah House Theological Seminary. He is a parishioner at St. Alban's Anglican Cathedral in Oviedo, Florida.