Tuesday, October 29, 2013

Socially Responsible Investing Tips


What is it
Socially responsible investing or sustainable and responsible investing (SRI) involves investing in companies that take into consideration environmental, social and corporate governance criteria such as environmental controls, community development, workplace diversification, labor relations and human. Industries involved in SRI include hospitals, public and private sectors, nonprofit organizations and religious institutions.   

SRI Companies
Several companies’ use SRI investing strategies - the most popular company is Calvert. Other companies include GoodFunds, Krull and Company, Green Century and Domini. Some companies require a minimum investment of $250,000 while others offer customized portfolios on a retainer basis.

Tax Benefits
There are SRI funds with tax benefits and some without. I recommend investing in funds that offer tax benefits. Check with your financial advisor for specific details.

Pros and Cons
SRI funds are often perceived to be riskier because a higher percentage of shares are held in small and medium sized companies which tend to be more volatile.  Typical disadvantages include lack of diversification and poor performance. However, SRI investment strategies are competitive with non-SRI strategies and can still allow investors to meet their financial goals.

Investors may not be allowed to pull out money at will and may be required to keep the money in for a certain period of time.  Investors may also have limited control over how their money is used. Some SRI funds charge higher fees such as an annual expense ratio and upfront sales charge, however some do not.

Investing Tips
Here are 9 tips to help you decide on SRI investing.

  1. Decide where you want to invest, how you will invest, when you need the money, what you need the money for and how long you want to invest.
  2. Identify your top socially responsible views and invest in companies that support them.
  3. Diversify investments and ensure you are comfortable with the allocations.
  4. Allocate a small portion of investments to clean technology.
  5. Put pressure Congress to generate socially responsible policies.
  6. Define your risk tolerance, investment goals and objectives.
  7. Decide how you will implement your investment strategies:  direct investments, petitions and dialog, awareness, screenings, activism or other factors.
  8. Increase demands on companies to be socially responsible through shareholder resolutions and meetings.
  9. Ask fund managers whether or not they expect performance to be similar to standard benchmarks or considerably different.

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