Put your money where your mouth is: Socially Responsible Investing
Back in the days of the Dot Com boom, everyone suddenly began investing in tech stocks like crazy, without much understanding of what exactly was happening. All they knew was stocks they bought for pennies in the morning turned into hundreds, even thousands by midday. The collapse of this boom, referred to as the Dot Com bust of 2001, crippled most of these tech start-ups, but also wiped out entire fortunes and retirement savings. And it seems we still haven’t learned our lesson, as today, we face the biggest financial meltdown since the Great Depression.
photo by DR04 (Image source: Wikimedia Commons)
Okay, so maybe we shouldn’t have put all our (retirement) eggs in one basket. Indeed, billionaire and investment genius Warren Buffet has one cardinal rule when investing – never put your money in things you don’t understand. He didn’t know what these new tech companies did so he didn’t put any money there. He didn’t understand what sub-prime mortgages were about and he left fairly unscathed when Black September hit the markets last year and the Dow plunged over 750 points on the morning of September 29, 2008. People were losing their jobs and their homes as a result.
Do we really want to see this happen again a third time in a decade? Of course not! Some people may think this is all part of a cycle – that we are doomed to keep repeating these mistakes over and over again. However, there is another alternative these days. Socially responsible investments (SRI) has been around for a very long time, but back when the Quakers prohibited their members from investing in slave trading in 1758, they didn’t have a name for it then. As the name implies, socially responsible investors is concerned are interested in more than the bottom line. These types of investments avoid funding companies which are involved in unethical practices, like those involved in exploitation of natural resources and workers and, instead, opt to give their money to companies which seek to do good for other and the environment. The easiest way to invest is to purchase mutual funds. These mutual funds have been screened to make sure each any every company benefitting from them have ethical business practices and in no way harm other. There’s a myriad of fund to choose from. PAX World Funds, was the very first SRI fund created, back in 1971. They only invest in companies “with sustainable business models,” particularly in the realm of social, environmental and governance issues. Their Global Green Fund (PGRNX), for example, supports companies which not only have outstanding green practices but also create technologies to benefit the environment.
Over the years, people have discovered that aside from being the right thing to do, SRIs can be profitable. Over $2.71 Billion dollars are currently invested in fund ethical funds. One of the largest SRI funds, the Domini 400 has an average return rate of 10.83 %. In the US alone, there are about 260 funds devoted entirely to SRIs.So, there are many options for those seeking to invest responsibly. However, do your research, as with any fund you invest in, SRI or not. So why not show your support with your dollars and invest in a socially responsible fund today!
By Maria Belgado
Additional resources:
PAX World Mutual Funds
Social Investment Forum
Social Funds
European Sustainable Investment Forum
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Tags: Domini 400, Green Funds, PAX world funds, Socially Responsible Investments, SRI
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