Put Your Money Where Your Heart Is

Published by Craig Wietz, President
August 27th, 2015

One of the most well-known investment philosophies is “…invest in what you know…” I first heard this phrase attributed to Warren Buffet, but it may have come from an earlier source. The philosophy implies that we see things around us every day which impress us from an experience standpoint. If they impress us, then we should assume they impress others. We then can investigate the company or experience further as an investment opportunity.

For example, if you shop at Costco you notice every time you go, they have many customers which implies they are doing well in business generation and customer experience. Therefore based on that experience, Costco could be considered a potential investment opportunity. With more research, you can determine if this is a good fit for your portfolio and move forward with an investment. Impact-return1 This same principle can be applied to Socially Responsible Investing (SRI). Each of us have causes close to our heart that we feel inclined to support. While donations to these causes may be appropriate, there is also the ability to actually invest a portion of a person’s wealth to help these same organizations.

Here are three examples of SRIs:

  1. Socially Responsible ETFs – ETFs are a way to invest in a passive index at a low cost. There are many indexes which track SRI related items. One example is WIL – Women in Leadership. This ETF follows the Barclays Women In Leadership Total Return Index. To be a part of the index, a company has to have a female CEO and/or at least 25 percent female members on the Board of Directors. Investing in these companies allows you to support the cause while also reaping in the return these companies achieve.
  2. Peer to Peer Lending – Peer to Peer Lending is a way to provide loans to people without using a financial intermediary. An example of this is The Lending Club. Investors are able to shop for loans they would like to invest in. Information such as credit risk, amount, interest rate, etc. are all available to evaluate. They can also see the purpose of the loan. For example, if you are interested in helping with other business startups or renewable energy, you can screen to invest in those types of loans. The Lending Club helps you build a portfolio and invest as little as $25 in each loan. This way, risk in any one loan is diversified. They have a successful track record in generating returns and screening loan applicants.
  3. Motif Investing – Motif Investing is a company that allows you to invest in stocks organized around a theme. On the surface, you could pick themes such as Anticipating a Bear Market or the Travel sector or Socially Responsible Investing. This could be very general in focusing on the traditional socially responsible companies or could be more specific such as investing in those companies who are supporting Ending Poverty initiatives. More information can be found at www.motifinvesting.com.

These are just a few of many options available for Socially Responsible Investing. It is not just a donation, but the ability to invest in these causes and have the opportunity to generate a return on these investments. It would be risky to pool all money in these types of investments, but it can be part of the overall investment portfolio based on what is attractive and reasonable for each individual. These vehicles exist for you to have a greater impact with your investment dollars in a way to benefit the causes that are closest to your heart.

About the Author: Craig Wietz, President of First Rate, has been an integral part of the company since 1995. In this role, he oversees all the business lines, the functions that develop and maintain client relationships, as well as strategic planning and the groups responsible for internal operations. Prior to his current role, Wietz was responsible for the Service Bureau business line and has contributed strategic insights in statement processing, third party data aggregation, model portfolios and benchmark services for First Rate. Connect with Craig via LinkedIn.

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