Investing With Morals?

My buddy Dave over at Warriors Hand posted a comment about my recent post on Investing in the Visa IPO I think he has some valid points in his comments and we can all learn from them, here is his comments:

Ok, here's a challenge for you brother! I'm financial planning challenged so I have bought in hook/line/sinker to Christian financial counselor Dave Ramsey (who is a more modern version of Larry Burkett). He is major "anti-debt", and uses several Biblical arguments (OT & NT) to suggest debt for the Christian is wrong (ie,debtor is slave to the lender). Not to mention investing in a company that makes its livelihood off of putting others in debt. Have you looked at his stuff at all?

Okay, first off I am a big Dave Ramsey fan as well.  I believe in our personal finances we should become debt free and once we start investing, we should try to remain debt free or pay off our investments.  Sometimes this is not possible though. 

For instance.  I want to buy a 110 Unit apartment complex in Houston, TX. Without getting into the weeds on details, the apartment costs $1.2M and has a competent management and maintenance team in place. I have $300,000 for a down payment or roughly 25% and will get a mortgage for $900,000.  After all expenses and the mortgage payments, the apartment produces roughly $70,000 per year in income for me. 

Now, If I would try to do the 100% down plan, Dave speaks of, this investment would probably not be a possibility for most.  However, through my income of $70,000 per year, appreciation in the property itself and reduction in the mortgage, I could be free and clear on this property in maybe 10 years.   In my book, a smart investment. 

Back to the original question.   When I invest, I look at figures, profits, management and a number of other factors, however in most cases, I do not look at the companies activities and if they are consistent with my beliefs or not.  For me, investing is an unemotional process.  This may be different for each investor and each investor has to determine if they want to support a company that is in line with their core beliefs or not.

To answer Dave's question though, Visa is not the villain.

Visa is simply a clearing house for transactions.  They do not charge rates, late fees or give people credit.  That is the domain of the issuing bank that issues the credit card (Capital One, MBNA, Citigroup) So in a sense, Visa is not the villain.  Plus, Visa is on your debit card right?  Do they charge you interest for having a debit card? No. 

Also, Dave Ramsey accepts credit cards for payment on his own website. 

This is a great question though and leads us to some further examination into credit cards and credit practices, which is the topic of Fridays Post.  The Lies We Believe.

Great Question Dave.