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Investing for a Good Cause


When considering your investment options, the first thing that comes to mind is usually how much of a return will you receive on your original assets. But did you ever think that you could use your investment dollars to truly make a difference?

Whether you're a friend of the environment, or have deep religious convictions, you can actually match your social and ethical concerns with investments that are in harmony with your personal beliefs. When you decide to put your money into investments that correspond with your own set of values, you are engaging in what's known as socially responsible investing. It may sound a little odd at first, but this practice is a legitimate-and widely accepted-investment strategy.


Most socially responsible investors look for companies that reflect their beliefs by sharing certain characteristics, whether it's strong community involvement, extraordinary environmental practices, safe products or even impressive employee relations. Searching out these companies may seem like an overwhelming task, considering the vast number of firms in business today. However, you can always enlist the help of a qualified financial consultant, and you may even feel a sense of personal satisfaction once you discover those companies you deem worthy of your investment money.

In addition to specific stocks, you can also select from a wide variety of mutual funds that fall under the category of socially responsible. Many mutual funds-including stock funds, bond funds and even international funds*-select securities based not only on sound fundamentals, but also according to the social values of the fund and its shareholders. These give you even more investment options to tie in with your own principles.

Another opportunity for socially responsible investing lies in private money management. Financial service firms typically offer the option of having some of your investment funds supervised by portfolio managers outside the firm, giving you access to many different managers. These managers can be selected on the basis of very specific guidelines to meet individual client needs. You can usually place both social restrictions and company restrictions in your individual portfolio. Finding a private money manager whose investment criteria match your social concerns is another opportunity for you to really feel a sense of personal responsibility with your money.


By now you may be thinking this sounds like a good idea. Sure, you'd like to know that your investment decisions are actually making a difference. But at the same time, you may be wondering how these types of investments compare with others that don't take into consideration a social or ethical component. To give you an idea, take the example of the Domini 400 SRI, a market index of 400 securities screened according to social and environmental criteria.

Measuring the Domini 400 index against the bellwether S&P 500 index, you'll find that returns for the Domini exceeded those for the S&P for five straight years, beginning in 1992. While both indexes have suffered annual losses each year since 1997, the Domini still came out ahead of the S&P in every year except 1999. Keep in mind past performance is no guarantee of future results, and you cannot invest directly in an index.

If you think socially responsible investing might be the right path for you, get in touch with a financial consultant to discuss your options.

*Investments outside the United States, especially those in developing countries, involve special risks such as currency fluctuations, political instability, and periods of liquidity.

Jonathan Block is a Financial Consultant with A.G. Edwards & Sons. Jonathan can be reached at (800) 273-8882.


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