Investment Tracking, Should You?

A mask to demonstrate how our investment tracking might be hiding our most relevant questions.
What’s hiding behind the questions we ask in our Investment tracking?

Investment tracking causing you worry?

Concerned you’re tracking isn’t getting you answers?

Getting answers, but feel like they’re merely cursory?

Or maybe you’re so overwhelmed by meeting tracking expectations that you aren’t even trying?

Investment Tracking Disguised as Stewardship

To start I think we need to ask ourselves, why track?

Is it because we’re afraid of losing our resources? Do we tell ourselves we’re being foolish with our resources? Need to report back to someone else who thinks we’re being foolish with our resources? Is it stewardship?

If we break it down, I think you’ll find, so many of the questions, and much of the angst, we bring to the new economy have nothing to do with the stewardship I believe should be leading these ideas.

In fact, I suspect most times, stewardship hasn’t entered awareness this early in the journey.

Generally, a numeric context oriented to some Wall Street benchmark generates the questions we turn to for answers in our investment tracking.

I think much of this unrest around our investment tracking is a holdover from an older business as usual (BAU) paradigm hiding just below our conscious awareness.

A BAU framework still uncovered and unrecognized.

BAU Benchmarks and Standards

My community investment journey is long. It started with community investment more interested in relationships than ROI. But more and more, I am privileged to work with folks turning to their retirement portfolios for their values-aligned investment.

Retirement money is driving a very specific set of questions, and I hear similar ones almost daily. This leads to a question around what to track?

Let’s start to uncover the BAU assumptions behind the metrics you find when you ask the what to track question for our retirement accounts.

In doing so, you’ll get a better sense of what you’re looking at for your investment tracking…

…for a specific example, let’s say a self-directed IRA.

(one of the newest investment frameworks entertained for values-aligned investing and crowdfunding).

The questions you ask for tracking in the IRA considers a relationship to retirement goals. 

I think consciously, folks are interested in using their retirement portfolios because they’re the largest sum of money people have access to where they can have impact. But if your using a retirement portfolio and you forget the BAU framework behind the tax favored retirement accounts, you’ll have problems.

Asking the questions is part of the discovery process

— and by asking, I think you will push the envelope so you become conscious of the frameworks in which you’re working and uncover BAU structures that may or may not serve your goals.

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As you do the work, know that for me, preservation values are important. There are likely BAU ideas that you (and I) want to preserve because they serve your (my) journey. These values should show up in the components you track.

But the questions and resulting tracking, especially those that are BAU inspired , should become explicit and considered. 

What BAU Investment Tracking Looks Like

In our self-directed IRA example, BAU calculations and resulting metrics design to make certain you meet your retirement portfolio goal – i.e., you don’t run out of money from your investment portfolio before you die.

These tracking standards include:

  1.  BAU expected earnings for Wall Street portfolios,
  2. Retirement age
  3. Life expectancy
  4. Lifestyle expectation in retirement
  5. Benchmarked withdrawal rate

Our new economy work, however, comes into play to deepen and give resilience to those metrics.

For example, you might look at share economy solutions. These solutions might include, commoning, multiple forms of capital and other interdependent, community-based new solutions to diversify your portfolio away from one-size fits all, money.

And give context to the retirement goal benchmark.  

I think this is important work and merits looking at the intersection of BAU and a regenerative economy.

Different Metrics for Values-Aligned Investment Tracking

There are other reasons and other examples where different metrics might apply for your investment tracking.

Much of my work, as grounded in Slow Money ideas, suggests we should do this at a human scale. In Slow Money we tried to give meaningful, values driven context to our metrics all the while inserting relationships into our financial system.

In many instances, Slow Money community members use money they feel they can afford to lose and prioritize different outputs (intellectual and experiential capital, social capital, or even a purer form of impact).

Many Slow Money folks are interest rate agnostic. Interest rate agnostic means they’re more interested in giving life to the project than concerned over a return on investment (ROI).

This Slow Money experience, sitting closer to the philanthropic edge of impact investment, yields a fresh set of questions while centering food, farms and soil health as the ‘right’ outputs.

This requires a different accounting than money earmarked for a future retirement.

Two Questions

So, no, I don’t have an investment tracking form to share with you…

…And to replace it, I lean back on asking you to develop an Investment Policy Statement (IPS) or Investment Policy Thesis (IPT) that starts with the questions I led with in our opening: 

Why do you want to track?

What do you want to track? 

What does tracking say about trust in the business owner where you have a relationship? — no judgement, just awareness.  

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You should never invest more than you can afford to lose — in money OR time OR energy.

To deepen the discussion, consider, if you lent or invested in a child’s or family member’s business, would you feel compelled to track? 

Coaching for Better Investment Tracking

When I coach values aligned investors, we start with a hard look harder at what at they feel they can afford to lose.

In early sessions, we might look at what they feel they might need in retirement for example. From there we might work through the BAU equation their advisor used to generate that number.

As these investors grow in their understanding of risk (theirs and the entrepreneurs), some find a willingness to risk more to potential loss, while others feel they can lose less than their initial design.

These things are evolving. Over time these are places to revisit and update as our situation and/or our understanding changes. As a result, what and why we track will change.

Your journey might look similiar.

NorthStar Investment Thesis

If time and energy are an issue for you, there are institutional investment alternatives that will meet BAU metrics. You might find them a better answer than community investments or crowdfunding.

However, if you build outside of institutions, I believe a relationship embedded holistic approach removes some tedium of tracking. (With a nod to analogy, are we using the ‘bricks’ we’re laying to build Cathedrals instead of unimaginative, non-contextual walls.)

After the hard work of developing an initial IPT to deploy funds to your community investments, you save time and energy — it serves as holistic surrogate for a tracking form or may generate a more holistic, meaningful tracking form. 

Personal Knowledge

Slow Money encouraged community-based investment with personal knowledge and relationship. 

In Slow Money, we tracked the total dollars invested. We aggregated the metric nationally to support the Slow Money narrative about community investment. 

Again, the why was important — note, we never formally collected defaults, or return. As a community, we were most interested in catalyzing new forms of capital for small food enterprise, not earning rent on the money deployed.

(Though there was some exchange around interest rate returns as unique groups framed the why question differently. It gave rise to greater understanding for the whole and the community.) 

Defaults

After more than a decade, Slow Money community members are getting more interested in the number of defaults. I think the metric is meaningful because we have a track record to give context. But largely, these metrics (our new why) come into play as we introduce these ideas and communicate with folks in the broader community. Default rates, in the BAU context are a common and expected metric for principle protection.

But, for those of us in the community, I think these numbers give a deeper framework to consider stewardship for our communities.

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Is your default rate an important metric for you? Do you ask yourself why you’re holding that metric?

Community into Investment

To serve the whole, I think regenerative finance works to bring community and relationships into investment.

Relationship is a proven risk mitigator. If you can walk into a place of business and visit with a friend-owner, you probably intuitively know (and may ask) how business is going. 

Harder, but I think it still translates, If you can hang out in a virtual community you may get to know the heart and business sophistication of the folks you’re hanging with depending on the group.

Virtual Community and a Bid for Intimacy

Boots on the ground for entrepreneurial and philanthropic solutions is a given today. To draw a parallel for our democratized finance work, you can turn to crowdfunding platform designs that rely on incognito phases. This early phase augments the virtual with the intimacy of the place based investment.

For those unfamiliar with the workings of crowdfunding, during an initial two week period, before entrepreneur is able to bring it to the larger public, the entrepreneur’s task is to first ask their intimate circle of friends and family to take part.

It’s not the dollar amount of participation that matters, but the number of friends and family willing to support the entrepreneur with some amount of dollars.

This incognito phase happens before a public raise.

Crowd wisdom, the concept that results in the raises success, also serves to replace some of the more intimate knowledge of place-based investment in virtual communities. 

Working towards Metrics that Matter in Investment Tracking

That all said, I continue to work to develop some mastery over financials.

We ask our social entrepreneurs to demonstrate commercial viability for resource stewardship and to augment a business case (why should we give resources that we might better deploy to a different situation).

Why wouldn’t we ask ourselves in the role of investors for a responsive financial literacy to match the entrepreneurial effort?

As you grow in your sophistication around values-aligned investment, our stewardship can serve with  and in creative tension to the numbers.

I am currently taking an accounting course where the instructor opened up the BAU ratios investors use as numbers that reflect stock and flow in a flow business. BAU ratios often look at the relationship of stock and flow.

BUT these ratios need context to serve a regenerative vision. 

The point is to interrogate the ideas behind the metrics to generate a more holistic idea of ‘tracking’. 

What do you think?

Are you using a tracking method for your values aligned investment?

Are you asking yourself why you’re tracking and what you’re tracking to better serve your IPS?

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