The 2nd day of the original Thrift Week end up Invest Safely Day. And no longer like having a financial institution account, this is a subject that numerous modern-day-day Americans still don't surely apprehend. However, there are plenty of articles already available at the basics of investing as it should be, together with diversification (i.E., no longer placing all of your eggs in a single basket) and balancing hazard with cross back (selecting better-threat, better-pass lower back investments for the long time, and extra stable, decrease-go back investments for money you'll want within the close to destiny). Indeed, I've written a few such articles myself, including this one on low-risk investments, this one on attaining economic independence, and this whimsical little one on monetary advice from the Bible.
None of that, but, has plenty to do with ecofrugality. The ecofrugal component of investing is socially accountable making an funding, or SRI. I've included this issue matter at MoneyCrashers as properly, and you could observe about it in detail there, but I'll fast sum up the number one elements proper here:
- SRI means choosing investments based not just on their value, but on your values as well. For most investors, this means investing in companies that have a good record on "ESG issues": environment, social justice, and corporate governance.
- You can choose your investments using either negative screens (avoiding things you disapprove of, such as tobacco or fossil fuels) or positive screens (seeking out investments in things you approve of, such as renewable energy or organic farms). One particular form of SRI is community investing—making loans to support small business owners and community development organizations, especially in low-income areas. Socially responsible investors also take part in shareholder action to influence the behavior of companies they hold stock in.
- There are a wide range of SRI investments to choose from, from mutual funds to microfinance. A good way to get started with SRI is to visit the Forum for Sustainable and Responsible Investment (US SIF), which offers a variety of resources on how to invest in ways that promote different causes.
Unfortunately, while I've understood the basics of SRI for years, I've never done a very good job of praticing it. These days, I do most of my investing through my automatic investment plan at Capital One, which pulls some money out of my online bank account every month and plops it into a simple "lazy investing" portfolio (a few ETFs with low fees that, between them, cover the whole market as broadly as possible). This is definitely the easy way to invest, but it has a downside: this ultra-simple portfolio doesn't include any social screens. And I never really figured out a good way to find investments that meet both my financial goals (low fees, broad diversification, modest but steady returns) and my social goals (clean energy, women's rights, all that good stuff).
Until now.
I decided, this being not only Green Thrift Week but also Inauguration Week, it was an appropriate time to finally put my money to work building the kind of world I'd prefer to be living in. So I did a quick search and found this US News article that recommends seven top-rated socially responsible mutual funds and ETFs. Then I punched each one of those into the search box on Capital One's website to see how the funds stacked up against others in the same category—in particular, the ones I regularly invest in now.
After looking at their returns, I selected a fund called iShares MSCI KLD 400 Social, or DSI, which is a "large blend" fund somewhat along the lines of the Vanguard Total Stock Market Index Fund (VTI) I've been investing in. It's not as diversified, and its returns aren't quite as good, but they're still above average for the category, and I'm willing to sacrifice a little bit of my return for the sake of investing in a world I can live with.
So, I have made one small change to my ShareBuilder plan, swapping out VTI for DSI, and voilà! I am now a Socially Responsible Investor! Starting next month, a portion of my money will be automatically invested in "companies that have positive environmental, social, and governance characteristics." If my returns suffer much as a result, I can always switch the funds back and try something else.
