You may have heard about socially responsible investments and wondered if you should include these investments in your own portfolio. What should you do?
It could be said that socially responsible investors use both their heart and their head when it comes to making financial decisions. Socially responsible investing (SRI) integrates personal values and social and environmental concerns with investment decisions. SRI is also known as mission investing, sustainable investing, green investing, etc.
Where do you stand?
Whether liberal or conservative, there are causes to support in the SRI world. Some are concerned about tobacco and alcohol. Others are not. But there can also be crossover, as SR investments can be both environmentally friendly and anti-nuclear, for example.
The first SRI fund, started in 1971 in the U.S., grew to $2.29 trillion by the end of 2005. The Social Investment Forum reports that in 2010 the SRI market accounted for $3.07 trillion out of the total $25.2 trillion U.S. investment marketplace. Social investments in the U.S. grew 380 percent from 1995 to 2010.
When it comes to influencing socially responsible change, money talks.
Socially conscious investors speak with their pocketbooks to encourage corporations to improve practices on environmental and social issues and to build wealth in underserved communities by employing these approaches:
1. Screening for negative and positive causes, such as tobacco, alcohol, gambling, weapons, animal testing, environment, human rights, employment equality, community investment, etc.
2. Taking an active role in talking with companies on social and environmental issues.
3. Directing capital from investors and lenders to underserved communities, providing access to credit, equity, capital, and basic banking products.
Although market declines have impacted many SRI funds, I think that market volatility will draw more investors to SRI investing going forward. The added emphasis on responsible investing means that investors will pay more attention to how their dollars are being invested.
Resource arms investors with information
The Social Investment Forum (www.socialinvest.org) is a national membership association that promotes socially responsible investing. Its website offers tools for investors including an extensive database of SRI funds with screen profiles and performance data.
These market indexes, which differ in their emphasis on social characteristics, track SRI fund performance:
Domini 400 Social Index (DS 400 Index)
Calvert Social Index
Citizens Index
Dow Jones Sustainability Index
Two sides to the coin and the softer side of SRI
The upside is that SRI makes someone feel good about investing. The downside is that you automatically rule out some of the most profitable investments in the stock market, such as oil for example. An SR investor generally moves toward softer service type firms, such as health care and tech, as these tend to be more modern, more integrated and less discriminatory.
So, what should you do? If you decide to add SR funds, you should use the same fundamental approach as with any other fund. The key is always to be diversified. Once your core investment mix is in place, you can screen funds according to your personal values and ideology.
Choosing The Right Retirement Plan For Your Business
Business owners and homeowners generally have to settle for less if they want to sell their business or a home in a timely fashion. That’s why it’s a good idea to put your earnings to work by setting some aside into a retirement plan.
Loaning Money To Family And Friends
If your friend or relative doesn’t pay you back, you could potentially receive a tax deduction and write it off as a non-business bad debt. However, you must document the loan properly by showing the IRS that it was a loan, not a gift.
Should You Refinance Your Mortgage?
With the low rates available, it is very tempting to refinance your mortgage over and over again. You really should think about how many times you want to refinance your mortgage!
