The main goal of investing is, and always has been, to make as much money as possible with the least amount of risk. It’s been that way for ages but today there is a new and growing group of investors who actually want others to benefit from their investments. These “socially responsible investors” care more about the impact of their investments then the actual money that their investment will make.
It’s an interesting trend to be sure and that’s why we’ve put together a blog today about socially responsible investing to inform you, our dear readers, about what it is and how it can affect you . Enjoy.
- What is the definition of Socially Responsible Investing (SRI)? SRI falls under two distinct categories. The first category focuses on stocks that pose little or no threat to society and are thus deemed to be “green” stocks. The second type of SRI involves a more proactive approach that looks at investing not just to grow wealth but also for the positive impact that it can cause for a people or a cause. In this second type the objective is to use the investment as a support or assistance device. Related to “microcredit” programs, these investment opportunities allow people to support a cause, movement, country or class of people and, in most cases, start with investments as low as $25.
- Where can an investor find Social Investment opportunities? Microcredit opportunities have actually grown into a $25 billion industry thanks to the Internet and emerging technology. For example, on the website Kiva.org, an individual consumer can search for a borrower, in any part of the world, that they might want to lend a hand. The Kiva tagline is “loans that change lives” and on their site they claim to have been the facilitator of $450 million worth of loans in over 70 countries. Calvert, Domini and TIAA-CREF are three other popular SRI funds that do the same thing.
- Are there risks with Social Investing? Like any investment there are certain risks but with Social Investing but they are usually quite low. Along with the ups and downs that come normally with the stock market there is also the fact that an investor will basically have no say over what is bought or sold with the money that they invest. The good news is that, for example, the aforementioned Kiva.com has an almost perfect 100% repayment rate among their investors. For people in the United States one of the only concerns is the seemingly exorbitant fees. For example, a $25 loan could easily have a $5 fee, equivalent to a 20% markup.
- Is Social Investing a good investment for everyone? Every investor has not only different investing objectives but also different needs. The benefits of Social Investing is that an investor can decide where and how long they want to lend out their money on a much wider scale than with many other types of investments. This allows an investor to better structure things to their needs and get their money back more quickly, in most cases. One of the most interesting things about Social Investing is that, in some cases, you can actually purchase “gift cards” and give them to people who you want to share your social commitment with. If you do, they will inevitably have to decide what to do with that money once it’s paid back.
Social Investing is making quite a bit of headway in the investing world as people and corporations around the world begin to realize that there is more to life than just making money and the “bottom line”. We hope you enjoyed our blog today and, if you have questions about social investing or any other type of investing, please let us know by leaving a comment or sending us an email and will get back to you with answers and advice ASAP.
