You probably learned at a pretty young age that there’s a difference between breaking the rules and doing something that’s frowned upon but...not necessarily unlawful. For example, it might not be illegal to put a bunch of fake spiders in our big sister’s bed, but that doesn’t mean it’s a nice or good thing to do, and when she freaks out and insists on sleeping on the floor of our parents’ room for the next two months because she’s so traumatized, we might even feel a little guilty about what we’ve done. Maybe. Possibly.
Guilt-edged investments kind of work the same way, and we love the play on the term “gilt-edged investments,” which is how some refer to super-stable, high-quality investment opportunities. Anyway, “guilt-edged investments” are investments that might not be illegal—we’re not necessarily talking about insider trading or Ponzi schemes or anything like that—but they do come with a potentially…shall we say…gray moral area.
For the most part, guilt-edged investments involve the investor profiting from arguably cruddy things happening to someone else…and feeling bad about it. It might not stop them from investing, but dang it, they feel bad about doing it. (One point to note: illegal investments can also be considered “guilt-edged investments;” it’s more about the squishy feelings that come with the investment than the terms of the investment itself.)
But let’s be real here: we all know that people have differing ideas about what’s right and what’s wrong, and those ideas might lead one person to feel like they’ve made a guilt-edged investment while another person making the same investment might think it ain’t no thing.
Take oil and gas investments. An environmentalist might think it’s really lame to profit off oil and gas trades when fossil fuel usage is causing so much destruction to our planet, and would therefore likely feel pretty guilty if they decided to go in on some oil futures...but someone who has a differing viewpoint on the whole fossil fuel debate might feel no guilt at all making the same investment.
Other types of securities—tobacco, alcohol, pesticides, pharmaceuticals, you name it—can also bring pangs of guilt to some of their investors, depending on what those folks stand for outside of their financial market life.