The following is an exclusive excerpt from Uninvested: How Wall Street Hijacks Your Money & How to Fight Back, a new title from Penguin Random House, out August 4, 2015.
Investing in One Dimension
Third-party analysts, such as Morningstar, credit- rating agencies, traditional accounting firms, and the financial media, have trained investors to consider their investments in exclusively financial terms. Mutual funds, in particular, encourage this one-dimensional perspective. Because funds and pundits are most comfortable with conventional metrics such as earnings per share, market capitalization, and quarterly returns, they emphasize these topics in their assessments. The success of an investment is nearly always measured by its return.
This highlights one of the major sacrifices one makes by investing in mutual funds and underscores a major missed opportunity for many kinds of investors. Though the financial component of investing is critically important, invested capital can also be a powerful way to influence social, environmental, and economic issues that are important to you.