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Monday, August 29, 2011

Is Investing only about maximizing your dollar return?

One of the fallacies of making an impact in a meaningful way is that you have to be a wealthy person to be a philanthropist.  You don’t have to be a Warren Buffet to make a social impact. Small amounts invested wisely can made a significant impact.

As we watch the stock market rocket up and down in the past few weeks I can’t help but feel that money I have invested through a financial advisor is being used like chips in a casino by crazy gamblers.  Is there any sanity in investing these days?  The housing collapse caused by reckless traders has destroyed many lives of average Americans and put our country into the most precarious financial position since the Great Depression. So what is the answer?  Maybe it is time to look at our investing in a whole different light.  Maybe we should find a way to use our investments to grow at a slower safer pace and do a social good. 

I have blogged about the Enterprise Impact Notes before and want to expand on the theme today.  This past week I had a chance to talk with Andy Loving from Just Money Advisors.  They work with individuals that want to invest inline with their social values. As their website explains,
The clients at Just Money Advisors tend to be people of deep commitments, people who work for peace, look for ways to create more justice in the world, make choices that minimize their negative environmental impact. They come to the financial planning process with strongly held values that they want to apply to their financial lives.

But they also hold strong commitments to the financial well-being of themselves and their families. They want to make the most of their incomes with good tax planning. They want to finance their children's college educations in a smart, ethical way. They want to manage their retirement wisely.

For some it is investing in green technologies for others it is in community development around the world and for others it is in social justice.  Andy pointed out for me some examples of how this is done.  One example to look at is Microplace that gives an investor examples of investments in a wide range of opportunities. Microplace uses PayPal to make your investment directly to the group you pick.  This investment is not a straight donation but an investment that has terms like any other investment.  Interest is usually higher for investing for longer terms.

Another foundation that does community development investing is a Maryland foundation called the Calvert Foundation. As their website explains,
The types of projects supported include affordable housing, microcredit, community facilities, small businesses, and social innovation. The Calvert Community Investment (CCI) Note is Calvert Foundation's flagship product and most popular offering.

Calvert Foundation was started when Calvert, the mutual fund company that helped pioneer the concept of sustainable and responsible investments, teamed up with the Ford, MacArthur and Mott foundations. Calvert Foundation serves as a facility for individual and institutions seeking to channel investment into disadvantaged communities with a simple goal—to help end poverty.

Individuals can invest in low-income communities and families while benefiting from a professionally managed portfolio with security enhancements, diversification, rigorous due diligence, and ongoing monitoring of investments.

Micro finance is providing small loans to individuals in developing countries to start businesses that provide a person the ability to become economically independent. One way to invest in this way is through KIVA which makes microloans to individuals who couldn’t go to a bank for a loan.  Interest is not paid to you on your loan and the repayment rate is usually very high but remember that you can lose your capital.  Safer than the stock market these days.  By spreading your loans around you even reduce your risk.

Stay with me as I know this might get a bit much of most of us non-investment savvy folks.  Another choice is what is a mutual fund called the CRA Qualified Fund. Community Capital Management is the registered investment advisor to the CRA Qualified Investment Fund. The CRA Qualified Investment CRA Shares was launched in 1999 as a community investing vehicle to help banks meet the requirements of the Community Reinvestment Act (CRA). The CRA, created in 1977, mandates that banks make capital available to the low- and moderate-income communities which they serve. Community Capital Management is the registered investment advisor to the CRA Qualified Investment Fund The Fund seeks to produce above-average, risk-adjusted returns. The Fund's portfolio of investments is mostly affordable housing of many kinds plus other economic and environmentally sustainable initiatives.  This fund can be purchased at many stock brokerage firms including Charles Schwab and Fidelity.

I hope I haven’t overwhelmed you with too much technical financial information.  What I would suggest is to talk to a financial advisor to have them help you look at the right investing strategy that best matches your social values.  If you can’t find an advisor that knows about social investing, contact Andy Loving at aloving@justmoney or his website.
While I am on this topic I would also like to promote the Family Funds at the Columbia Foundation as another way to make an impact in our community.  While this is not a financial investment it is a way to give back to our community.

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