The other day someone asked me, why don’t we invest in wind power or some other new energy rather than old energy, such as oil, gas or petroleum products that right now are substantially profitable? Why don’t we put the good of all in front of profits? This is a noble thought but not a prudent basis for a financial decision.

People hire me to help them be profitable, mitigate risk and maximize their financial potential so they can worry less, have more opportunity and increased ability to make a difference in the lives of others.

In 1986 there were many people investing in limited partnerships, from ostrich farms to cattle ranches to other business endeavors, which had no hope of making money, but offered tax advantages. People with high incomes ate up these partnerships like candy because they created 2 to 3 times the tax credits for every dollar invested. But the only thing that made these investments profitable was tax law. 

So what happened one day?  Senator Packwood from Oregon decided to change the tax law and all of a sudden all these phenomenal limited partnerships, that looked so promising, became worthless overnight.  One of Wayne’s rules is “never invest in anything that relies on tax law to be successful.” 

Now this rule came from my experience back in 1986 when I was young and had a head of hair, but it still holds true today as much as ever.  Wind power relies on tax credits to be viable.  Will this change?  Probably, but not soon.  As your advisor, it’s not prudent to have you invest in things that if the government changed its mind, ran short of money, or just went a different direction, the investment would be totally lost.  So yes there are many things that we can debate would be good for our future, the environment and sustainability long-term, but they also must be viable investments or they make no sense for us to invest in them.

There are many reasons why you invest.  But if the underlying investment does not make business sense, no matter how much you like the company, process or idea you should not invest. 

Prudence trumps ideology!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including potential loss of principal.