You may have heard the term “social investing” before. Broadly, this term describes investing that doesn’t just have financial returns as the end goal. These investments have social returns, as well. Investing in companies and ideas that combat climate change, promote a better future, or advance a social cause would be examples of social investing. It’s a popular way to invest for people who are not just looking for maximum returns but instead want to use their financial resources for good. Although with that said, it is worth noting that many of these investments enjoy a very high return rate.
If investing in companies that advance society in some meaningful way sounds appealing to you, here’s some information on getting started!
Which Social Causes Are Important To You?
Before embarking on your social investing journey, consider which causes are the most important to you. Do you want to see greater diversity in companies? Do you want to invest in a greener planet? Do you want to promote workplace benefits, including higher wages and stronger employee protections? These are all example causes, but yours can be different.
Figure out one or two critical causes about which you’re passionate. You’ll want those causes to guide your investment strategy moving forward. It’s worth noting that, while you might be passionate about multiple social causes, narrowing it down to one or two will make finding quality investments easier. Most companies and funds cater to one or two causes, not all!
See the Options Available
Now that you know what social causes are important to you, you’ll have to see what options are available. If you’re investing through your 401(k), your options may have limitations. Some 401(k) plans offer minimal investment choices, and none of them may work for social investing. In this case, you may need to contact your company’s HR department and ask them to make a social investment fund available to employees.
If you’re investing through your after-tax funds or your IRA, you’re in luck! There are plenty of social investment funds out there from which you can choose. SPDR, iShares, Nuveen, and other similar companies all make funds that invest in companies with specific social objectives. For example, SPDR offers a fund that invests in the most gender-diverse companies. Its top holdings include Visa, Home Depot, Johnson and Johnson, and other big-name companies. The ticker symbol is aptly named: SHE.
Do Your Research
Next, you’ll need to do some research into the funds and companies that interest you. If it’s a mutual fund, look for evidence of the social cause in the prospectus. Read what they’re doing to advance it. For example, the gender-diverse fund invests in the top publicly-traded companies that are also the most diverse. A climate change-focused mutual fund might invest in green energy companies, like Tesla.
Also, look at the historical return rates. While investing in social causes is essential, you also want to make sure that your investments will earn a quality ROI. After all, the more money you earn, the more you can reinvest in other social causes. It has a snowball effect!
Consider Alternative Investments
If you’re an accredited investor, you can invest in startups that aim to solve social problems – especially those that will solve them within your local community. It’s a fantastic way to impact the world while, hopefully, earning an excellent return.
You can also lend money through unconventional sources, as well. For example, the New Hampshire Community Loan Fund “enables individual investors to help low and moderate income families in New Hampshire with housing, employment and childcare.” Individuals who invest in this fund earn a fixed rate of return. There’s no guarantee associated with the money (although it’s worth noting that they’ve never lost investor’s funds). Once this fund receives the money, it loans it out to low and moderate-income families. They can improve their lives with money at interest rates they won’t get at any bank.
Social Investing at Mack Capital
At Mack Capital, we understand social investing and the many available options. Whether you’re looking for alternative investments that advance social causes in a meaningful way, or you would like some stock or mutual fund options that suit your portfolio, we can provide guidance and assistance. That way, you’ll ensure that your money is promoting your preferred causes.
It’s a win-win. With the right investments, you can watch your money grow while leaving your positive impact on society. If that sounds good to you, please get in touch with us at Mack Capital!