The Cost of a Conscience

How you invest does make a difference to the world

Investing for your retirement is difficult enough without advocates for socially responsible investing getting in the way. Most people just want to put a little away each month knowing that when they reach retirement age they won't be living under a tin roof somewhere. You're probably not too concerned about what's happening on the other side of the world in some emerging market. However, your investments can make a difference.

If every person in the United States took 10 percent of their investment capital and focused it on those companies that actively sought to make the world a better place, it soon would be. Companies doing their best to pollute the planet would be driven out of business by social and shareholder activists whose values came before their pocketbooks.

Making a difference in the world isn't easy. There are so many problems, it seems hopeless to think we can make it better. Maybe so, but turning away from them isn't the solution.

One answer is to thoroughly understand how your money is being invested down to the very last penny. Knowing the details of each and every investment will do an immense amount of good for you and hopefully the world as well. Don't stop e-mailing those mutual fund managers that continue to sink funds into tomorrow's Exxon Valdez. Know what companies are in your mutual fund and what their businesses are all about. The more you understand about your investments, the better you'll do as a socially responsible investor.

Values define people, companies, countries - pretty much everything. If you don't find a certain behavior acceptable for a friend, why would you find it acceptable for a company or country? You wouldn't. To be socially responsible with your investments means holding them to account just as you would your friends and family. It may not appear today like it will make a difference, but in ten years time your diligence will be rewarded with excellent returns on your investments and a better world. There's nothing wrong with that.

Socially responsible investing is popular in the investing world today not because it's the right thing to do but rather because it's the smart thing to do. The original creators of this type of mutual fund were pioneers and had very little to emulate, and as a result their returns were less than stellar. However, newer and more experienced SRI money managers have been able to achieve market-beating numbers. The stigma of underperformance is no longer an issue.

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