Q: When my father passed away last year, I inherited more money than I’ve ever had to deal with. I felt totally unprepared to handle the responsibilities that go along with managing investments, so I just left the account with his stockbroker. Now that I’ve started looking at my statements, however, I see that I’m invested in a slew of companies that are damaging the earth. I asked my broker if I could move out of those companies, but he said there isn’t really any way to sort out good companies from the bad, so I might as well keep my investments where they are. Is he right?
St. Paul, Minnesota
A: Your broker probably has your best interests in mind, but he’s woefully uninformed about the choices available to you. There’s now a vast array of financially sound, values-based investments that will earn competitive returns and align much more closely with your environmental and social views. In fact, according to the Social Investment Forum, more than $2 trillion in the United States is invested using social criteria.
This is not merely a niche started by aging hippies and tree huggers. Way back in the 1920s, religious investors launched the Pioneer Fund. These conservative investors avoided alcohol, tobacco, gambling, and firearms in their personal lives, so they decided these industries didn’t belong in their investment portfolios either. The fund now has a seven-decade track record of strong, consistent performance.
Today, the trail blazed by religious investors has grown into a vast global network that has expanded well beyond these original “sins.” The environment and corporate responsibility are among the current hot topics. This movement goes by various names. Socially responsible investing, or SRI, is the most common handle in the United States. We like to call it “natural investing” because it’s natural for people to want their money to be on the same ethical track as their lives. It doesn’t make much sense to work for a healthy environment while your money supports companies that are tearing up the planet!
If your broker isn’t willing to do the work for you, take the first steps toward natural investing on your own. Start learning about the many ways that people use their heads and their hearts to invest wisely for their future. Here are some resources to get you started:
Co-op America’s $20 annual membership is a bargain: The group publishes an annual financial planning handbook that provides worksheets, articles, and a directory of social investment services. www.CoopAmerica.org; (800) 584-7336.
At the Social Investment Forum, you’ll find studies and press releases about SRI and social investment professionals in your area. Another website, SocialFunds.com, is a good place for valuable news and mutual fund information.
Check out our book, Investing with Your Values: Making Money and Making a Difference (New Society, 2000), and newsletter, GreenMoney Journal. Our websites—www.NaturalInvesting.com and www.GreenMoney.com—contain information and links.
Q: This year, I want to add to my IRA. I already have two IRA accounts: one with a mutual fund that isn’t “green,” and the other at a bank, where it’s not earning much interest. I’m thinking about starting a third IRA with a green mutual fund but I don’t like having so many accounts. Is there a way to do this?
Santa Fe, New Mexico
A: Yes, you certainly can consolidate your accounts into a single green account—more about that in a minute. First, it’s good you’ve realized your existing IRAs don’t meet your needs. If you’re invested in a mutual fund that doesn’t use social “screens” to avoid certain companies and industries (and choose positive ones), you’re almost assuredly invested in things you don’t want to support. If you’re going to use mutual funds, we strongly recommend choosing ones that disclose their social and environmental investment policies.
Most people don’t realize it, but even a bank account is a kind of investment. You’re lending money to the bank, and it uses your money to make more. Unless you’ve chosen a “community” bank that keeps the money local, your bank is simply shipping your money into global capital markets, where it could be involved in objectionable practices. In addition, IRA accounts are generally used for long-term investing, and most financial professionals would advise using mutual funds that invest in stocks and bonds to seek higher returns.
Your broker probably has your best interests in mind,
but he’s woefully uninformed
about the choices available to you.
With a little research, you can find socially screened mutual companies that offer IRA accounts. Some of these fund companies, including Calvert, Pax, and Citizens, offer a wide range of funds so that you can have your IRA at one company but diversify into several different mutual funds. You can also work with a financial adviser to consolidate your IRA at one brokerage company. These moves can save money because IRA custodians—IRA “keepers” who provide reports to the government so you get tax benefits—generally charge an annual fee to hold your account.
Your new IRA custodian will provide a “transfer form” that will move your existing IRA to its new home. If you follow procedures, you won’t have any problems with the IRS because you’re never actually touching the money. However, if you simply withdraw an IRA and don’t move it to a new IRA within sixty days, you could have tax consequences. It’s much simpler to let the new custodian take care of the transfer for you.
HAL BRILL and CLIFF FEIGENBAUM are co-authors of Investing with Your Values: Making Money and Making a Difference (New Society, 2000). Brill is president of Natural Investment Services, a Registered Investment Adviser in Paonia, Colorado (NaturalInvesting.com). Feigenbaum is publisher of the award-winning GreenMoney Journal (GreenMoney.com), a socially responsible consumer publication. Green Money is a registered trademark of GreenMoney Journal/Cliff Feigenbaum. Used with permission. This material is for informational purposes only. It is not a solicitation to invest.
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