Friday, October 9, 2015

Money Crashers: What Is Socially Responsible Investing

I haven't really talked a lot on this blog about investing, because I haven't found many ways to tie it in with the topic of ecofrugality. After all, investing is really about earning more money, not spending less—and "eco" doesn't usually come into it at all.

Except for some investors, it does. Socially responsible investing, or SRI—the topic I explore in my latests Money Crashers article—means choosing your investments based on social goals as well as financial ones. In other words, it's investing in companies you want to support because you approve of what they do, and refusing to invest in companies you'd love to see disappear off the face of the earth entirely.

There's a certain sense to this. After all, if I won't shop at Amazon because its labor practices are so evil, what kind of sense does it make to be investing in Amazon's stock, so that I actually earn a share of its ill-gotten gains? It's inconsistent at best, hypocritical at worst.

But unfortunately, while I've never actually gone and purchased a share of Amazon stock, I'm sure I must own some. See, I do nearly all my investing through index funds, since (a) they provide automatic diversification, (b) they have much lower fees than managed funds (which makes them the frugal choice), and (c) if they never outperform the market as a whole, at least they never underperform it, as most managed funds do most of the time. And when you buy an index that covers the whole stock market, or even just the biggest companies, you end up with stock in Amazon whether you want it or not. So while I approve of SRI in principle, I've found it a bit difficult to do in practice.

However, after researching my article on SRI for Money Crashers and learning about all the different types of socially responsible investments that are available, I've started to think it might be time to give it another try. US SIF, a website devoted to socially responsible investing, offers several investment guides, including Investing to Curb Climate Change, which notes that there actually are index funds designed specifically "to help reduce the overall carbon-intensity of your portfolio." So I'm planning to look into some of these and see whether I can use them with my automatic investment plan at Capital One.

If you'd like to investigate this type of investing more yourself, you can start with the full article on Money Crashers: What Is Socially Responsible Investing (SRI) – Types & How to Get Started
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