A Get Rich Slowly reader recently submitted a question: “What options exist for socially responsible investment?”
My husband and I save, and we own a house and may invest in more property later, but one thing we won't do is play the stock market. We spend a lot of time thinking about the ills of the world and the way to live our lives to make things even a little better. It seems to us that the root of the problem with business is greed. Jobs are outsourced, employees shafted, customer service is non-existent, and products are only safe and reliable in so far as government regulations force them to be so. And those government regulations are often written by the corporations they are meant to regulate, co-opting and damaging our political system. Part of this is the public constantly wanting cheaper goods, no doubt. But a larger component is the bottom-line mentality. The idea that dividends must always be paid in increasing amounts, and endless growth is the only way to survive. The root of this is the stock market — public companies are beholden to investors and boards, who place increasing pressures on companies to put profit before all else.
Those are not values that we share, and we don't feel comfortable investing in stock, even if the company itself is a good one. The system itself is counter-productive to our goals of a happy fluffy bunny world. So are frugality, saving, and possibly real estate the only “investments” open to us? Is there a way to build our reserves beyond these?
I submitted this question to a close friend, a man who is both socially conscious and fully engaged in the pursuit of financial independence. This is the sort of thing he thinks about all the time. His response:
First, your family's decision to save makes you look like the children of Lake Wobegone. The U.S. Commerce Department reported that the United States personal savings rate in 2005 was negative — we Americans actually spent more than we made. By being frugal you will most likely be able to sustain your savings rate over time. However, frugality and savings may not provide the nest egg you need to pay personal expenses through your retirement years.
Real estate investment is a good tool to assist you in obtaining that financial goal. Real estate, like any other market, is susceptible to peaks and troughs. A strong financial plan to obtain a healthy retirement funding source requires a solid, diversified base. The stock market is one avenue that would allow you to diversify, but the personal issues you raise are important.
Balancing socio-political principles and values while trying to save for the future is a difficult process. This balancing act has become easier since financial institutions started taking Socially Responsible Investing seriously. According to the President of First Affirmative Financial Network, there are over 201 mutual funds targeted at investors who wish to affirm their principles through their financial decisions. The Calvert family of mutual funds is of these, and is popular with investment companies such as AG Edwards and Edward Jones.
Government treasures allow you to invest relatively safely, but the return on investment may discourage their use. Since you are interested in purchasing property you may want to consider Real Estate Investment Trusts. REITs allow you to purchase shares in a financial institution that manages real estate. They may provide a more diverse portfolio and support your socially conscious principles. Shares in REITs tend to require more investigation than just choosing a high performing mutual fund.
The financial landscape offers investors many options. My advice is to continue to live simply and to save at as high a rate as possible. However, consult a financial planner about building a diverse financial portfolio that is consistent your values. A good financial planner should be able to provide a host of options that will allow you to achieve your financial goals without giving up your values and principles.
Remember: reader questions and comments are always welcome.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.