Merging money, beliefs boosts more than bottom line

When considering investment options, the first thing that comes to mind is usually how much of a return will be received on original assets. But did you ever think that your investment dollars could be used to make a difference in other ways?

Whether an investor is a friend of the environment or has deep religious convictions, individual social and ethical concerns can actually be matched with investments that are in harmony with personal beliefs.

When investors decide to put money into investments that correspond with their own values, they’re 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.

Finding the right fit

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.

You can, however, always enlist the help of a qualified financial consultant, and you may feel a sense of personal satisfaction once you discover those companies deemed worthy of your investment money.

Fund options

In addition to specific stocks, there also is a wide variety of mutual funds to select from, that fall under the socially responsible category.

Many mutual funds, including stock funds, bond funds and international funds, select securities based not only on sound fundamentals, but also according to the social values of the fund and its shareholders.

It’s important to note, though, that investments outside the United States – and particularly those in developing countries – involve special risks such as currency fluctuations, political and economic instability and periods of limited liquidity.

Several exchange-traded funds also have been created in recent years targeted to socially responsible investors, and provide additional investment options that can be tied in with individual principles.

Private money managers

Another opportunity for socially responsible investing lies in private money management.

Financial-services firms typically offer the option of having some of your investment funds supervised for 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 social 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 have a sense of personal responsibility with your money.

Comparing investment choices

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 wonder how this type of investing compares with those investments that don’t take into consideration a social or ethical component.

To give you an idea, take the example of the Domini 400 Social index, a market index of 400 securities screened according to social and environmental criteria.

Measuring the Domini 400 against the bellwether S&P 500 index, which covers 500 industrial, utility, transportation and financial companies in the U.S. market, will show that the returns for the Domini index closely resemble those for the S&P, according to data from KLD Research & Analytics Inc.

But bear in mind that 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 – and your money – get in touch with a financial consultant to discuss your options.

Timothy M. Reese is senior vice president-investments with A.G. Edwards & Sons Inc. in Springfield. He may be reached at timothy.reese@agedwards.com.