Socially responsible investing is one of the newest frontiers in what might be considered a movement toward greater social awareness. This movement encompasses not only the people that comprise a society, but also the ecosystem within which that society lives. Therefore, socially responsible investing is directed toward a consciousness of social welfare and Earth-friendliness. With the green trend growing strong, it’s not difficult to find investments that are worthy of the socially responsible cause. However, such investments do carry risks that are worth taking a serious look at. When deciding whether or not socially responsible investing is worth the risk, it’s a good idea to examine the following considerations:
Emotional investing is not good investing. Any seasoned (and successful) investor will tell you that emotion has no place in good investing. Socially responsible investments are the most likely ones to be made out of emotion, because when you choose such an investment strategy, you are doing so because you care about something that has nothing to do with the stock market. When entering into socially responsible investing, you must make it a point to choose your investments because you think they will be lucrative–not because what they stand for makes you feel warm and tingly.
Socially responsible investing is relative. There is no definitive category when it comes to what is, and what isn’t, socially responsible investing. For example, people who are against guns may think that socially responsible investing requires that they not invest in any gun manufacturers, and people who are proponents of the 2nd Amendment right to bear arms, might feel very strongly that socially responsible investing requires that they put their money into gun manufacturing. This means that you must decide what socially responsible investing means to you, or else you run the danger of putting your money into a fund that supports something you are against.
Limited choices. If you are familiar with investing, then you know that your best investment strategy is a diverse portfolio. One of the problems with socially responsible investing is that you are very limited when it comes to investment choices. If what you aim to protect your investment by diversifying your portfolio (and there is no better way to protect your investment money), then you may find socially responsible investing to be a bit claustrophobic.
Socially responsible investing is an honorable undertaking. However, that does not automatically mean that it’s a lucrative undertaking. Consider all of these points when deciding whether or not socially responsible is worth risking your money.
Samuel Sawyer loves to write about investing and money. He is currently looking at information about the best stocks to buy by Timothy Sykes and enjoys reading reviews from financial gurus.