Socially Responsible Investment and an Improving Market

Wojciech’s Notes: This is a guest post from Ann Logue, author of Socially Responsible Investing For Dummies (aff.). Thanks to her generosity, I had a chance to read her newest book last week. She is the author of three Dummies series books, and of multiple articles in high-profile publications. It’s truly an honor to be hosting her on the blog today.

First, a few words about Ann’s book. I honestly did not know what to expect when I heard about the concept of socially responsible investing, but I was pleasantly surprised. It doesn’t hurt that I like the Dummies series in general, because these books are great overviews/introductions to almost any topic imaginable.

Most people think that by investing “green” or “local,” or any other form of responsible investing, they will be sacrificing their own profit potential somehow. Not so, says Ann. In fact, she argues that you can match and even out-perform your run-of-the-mill investments by selecting those that are socially responsible.

Ann tackles three major areas in her new book:

  • Issues you can invest in, like local community development, the environment, internationally-sensitive companies, and religion.
  • How to go about the business of investing, banking, dabbling in real estate, and more–all on a socially responsible level.
  • Understanding the dynamics of social investing, how to do the research and monitor/influence your choices.

For anyone interested in being more sensitive to social and global issues in all areas of their life, this book is a great place to start when it comes to money.

Enjoy Ann’s guest post:

The economy seems to be improving. It may not be turning around fast enough to make everyone happy, but any good news is welcome right now. As people start to get jobs and start to get back on their feet, it’s time to restore depleted emergency accounts, set up 401(k) plans at new jobs, and invest to make up for losses incurred over the last few years.

One of the reasons that I wrote Socially Responsible Investing for Dummies is that people need to take charge of their own finances, but some people seem afraid to in part because they think it’s immoral or something. We have a lot of conflicts about money and wealth in our culture, and few people want to think that they are getting rich while making the world worse! You don’t have to make the world worse, either. In fact, you may be able to make it better. That’s the power of capitalism.

So, when you think about rebuilding your finances and doing good in the world (or at least not adding to the bad), here are a few ideas.

First, consider socially responsible equity mutual funds. The stock market is usually a good place to be when the economy improves, and many different mutual funds are designed to participate in stocks without compromising the shareholders’ values. (Does the market still look scary to you? Warren Buffett says that’s the time to buy. He’s been right more often than he’s been wrong, too.) An ethical company may perform better than average, if only because it has less risk from random scandals. Search Morningstar to find some socially responsible mutual funds that might suit you. And, talk to your employer’s human resources department about adding a socially responsible mutual fund to the 401(k) plan.

If you still aren’t comfortable with the stock market, consider Treasury Inflation-Protection Securities issued by the U.S. government and available through TreasuryDirect. The interest rates on them are extremely low right now, but these bonds are indexed to inflation. If we have inflation in the future – and some economists think we will – then you’re protected.

Another safe and social investment to consider for rebuilding your emergency fund is a bank account at a Community Deposit Financial Institution (CDFI). These are local banks that specialize in savings and lending services that strengthen neighborhoods. Deposits are insured by the Federal Deposit Insurance Corporation and are used to fund loans to homeowners and small businesses. You can find a list of CFDIs at this page.

Finally, one thing that I kept coming across when writing the book was the importance of paying off debt in many religions. For example, Islam forbids the paying of interest, and Mormons believe that excessive debt creates family instability. No matter your beliefs, if you have debt, chances are that you are paying a much higher rate than you are earning on any savings or investments. Paying off debt is a risk-free way to increase your net worth, and it gives you some wiggle room if your financial situation changes for the worse.

What do you think of Ann’s ideas? Would you like to win a copy of her new book? Just leave a comment below and I’ll see to it that you’re entered in the giveaway! (As usual, you must live in the U.S. or Canada to be eligible).

Photo by David Prior.

10 thoughts on “Socially Responsible Investment and an Improving Market

  1. Great article! I’d be interested in a copy of her book. I’ve written about socially responsible spending in the past…but never thought about socially responsible investing.

  2. I’m a big believer in values-based financial planning. Every dollar we lay down is a vote. Why should oure investment dollars be any different? I’ve never understood the folks who are uber “green” and aware in every area but investing.

    I also think that climate change is going to force certain socially-responsible companies to expand and increase revenue, which only bodes well for investors.

    Anyhoo, so glad to see this guest post! Thinking about personal finance in a holistic manner is so important. Please officially enter me in the give away, Wojo! I love the Dummies series as well. 🙂
    .-= ConsciouslyFrugal´s last post: Tuesday’s Tip: A Genuinely Free Credit Report =-.

  3. This is the type of investment advice I’ve been looking for. I don’t want to invest in just anything, especially if I don’t believe in what they are making or how they are conducting business. I’m going to get a copy for my friend for her birthday too as she just got a large gift to invest and isn’t sure what to do with it!

  4. Socially responsible investing is an interesting concept, and something that I fully support as a part of a complete plan of value investing for an individual’s life. By value investing, I’m talking about taking actions, financially or otherwise, that connect your values to (in the the case of finances) saving/investing, but I would caution that socially responsible investing needs to go beyond buying mutual funds in a company whose ideology we support to making clear choices about how we live our lives. For example, the company you work for and the job you hold is as much a reflection of your current level of socially responsible investing as your stock portfolio. You are simply investing your time. What you are hoping to gain is some form of success in the social justice realm for the organization and for society at large. If you are working at a non-profit, then you are also investing a large chunk of future earnings that you could have earned at a company that is less than ‘socially responsible’.

    My point in saying this is that while, yes, the Bible does say get out debt and stay out of debt, it also talks about investment in terms of your time, talents AND treasures. Socially responsible investing, then, is more a lifestyle choice than a wallet choice.

  5. I don’t invest yet but when i am in a position to do so it will definitely be socially responsible…. I will be very interested in reading the book(s) when that time comes.
    .-= Forest´s last post: Now Insanity – Continuing The Workout At Home Trend =-.

  6. I find that Ann has a way of telling us the story in a way that even those of us who may not understand it otherwise – GET IT. I look forward to reading her book, moreso if I win it. Thanks for the opportunity.

  7. The trouble with socially responsible investing is it forces you to take a view and into positions that are at odds with your other criteria.

    If you’re not an investor this may sound great, but if you are you’ll know what I mean.

    Say you want to invest in stocks. It’s very likely this path will push you into small cap, niche players, which are much riskier than the traditional Dow companies or index funds people usually feel safe in.

    Such investments may do well or badly, but to be honest a portfolio of them is likely to follow more how their sector of the market does than their particular green area of investment.

    Also, today’s evil is tomorrow’s good (the Internet was a military networking project originally, remember!)

    I understand the motivation, don’t get me wrong! 🙂 Just offering the other side.

  8. Happy to report that a winner has been selected! picked comment #2, which is Aldra from Consciously Frugal. Congratulations!

    Thanks to everyone who entered, and good luck on the next giveaway!

  9. I’m with Monevator on this.

    Social investing sounds good in theory but in practice you’ll always be leaving money on the table.

    Am I the only one who found Ann’s message confusing? She said we have to get over the mindset that money is evil. Yet the concept of social investing to look for companies that are out to make a difference not just a buck.

    Also, how do TIPs relate to social investing? One could argue that the government is the least socially conscious entity out there.

    When it comes to investing, I’m a pragmatist. Make the highest return for the least risk. Create wealth and then use that wealth to change the world. After all, the only actions you can ever control are your own.

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