Investing is done with a motive of reaping profits at a later stage. But if the investment is done in adherence with certain beliefs and values, so that you are in a right perspective of your own always, then that is socially responsible investing.
Socially responsible investing is sometimes referred to as a ‘two bottom-line phenomenon’ because the investor here is not looking for profits alone but while doing so, also to meet certain criteria of moral origin so that he/she can sleep peacefully at night with a clear mind. The second bottom line can anything of religious, moral or any other technique that you have picked up from your Chicken Soup for the Soul guide while you last ran your eyes through it.
Given the wide range of attitudes out there, socially responsible investing demands an extensive screening of mutual funds and companies that conflicts with your policies and beliefs. But in certain cases, even the socially responsible investors fail to find a voice of unison. In other words, it can be relative at times. For example, gay-benefit issues always raked up such differences in opinions. Some companies are active supporters of gay-benefits while some others see that as an aberration of one’s character. But it is the way things go and it is all about where you draw the second bottom-line.
One might get the apprehension that if such a stringent attitude has an existence in this ruthless capitalistic world. But the fact is that $1 in every $8 is prompted by such a socially conscious mindset. Socially responsible investing has been there through the entire history of investing, at least in a subtle proportion.
Socially responsible investing is almost same as any other investment but with social fiber and a little more researching. Before you jump into the wagon, learn the basics of bonds, mutual funds, stock market and garden gnomes.
Figure out your priorities and lay down a socially-screened portfolio that contains those opportunities which you would turn down on the second bottom-line grounds. There are umpteen ways by which one can implement the second bottom-line. In this regard, one should be clear whether to maintain a take-no-prisoners attitude or employ a more drawn out screening where every point of the supply chain is checked for a possible breach of moral or ethical fiber. But these standards are exclusively up to the person to decide.
Before embracing a socially responsible investing idea, have in place your financial priorities and the risk-level you are willing to take. It is this critical decision that has a further bearing on your fortunes at a later stage.
There are a set of points raised against the viability or future of socially responsible investing. It is sometimes argued that socially responsible investing is not profitable often. But in reality, it is the one that mints profits at a rate better than other sort of investments. Also critics point out that given the moral constraints associated with socially responsible investing, it is unlikely to have a lot of choices out there as business is a murkier game often. It is true that 100% compliance is an impossible reality. But screening process is an honest way to crop down the list and find the best of the lot.
Once done with research and laying the concerns to rest, it is time to pick your companies. Either you can invest in mutual funds or select companies by your own.
The advantage with mutual fund is that the fund manager does all the research for the investor. On a flip side, you as an investor might not be able to agree with the policies of every company chosen. To zero in on the right company may appear to be a daunting task, but it is not so in reality.
Search the internet to get the list of socially responsible mutual fund companies. One can also go by reference. Now, check the company website and request a prospectus from them. A prospectus ideally should have the company policies, its screening criteria, fund’s financial performance and an application form. After deciding on the mutual fund of your choice, order the prospectus online or by calling the toll free line. Ideally, it will be delivered at your door step.
If one is deciding to select companies by his/her own, then it is going to be a bit more time consuming as you have to do all the research and findings on your own. Check if the company you are focusing is listed in any socially incline mutual funds. Another less precise method is to find out if the company is contributing to any charity in a larger scale. The latter mode is not so reliable; hence as a follow up take care to diligently scan their records to find out if they are putting up the big bucks show to make themselves appealing to others.
Once decided on the socially responsible investing method, you can inform your financial advisor or buy the stock directly from an online trading company or a stock broker.