Whats with Social Investing?

Social investing is the act of investing in companies or product the investor finds socially acceptable. The idea is that an investor may not put their money into a company that uses harmful product or materials know n to be bad for the environment. As an investor they can feel comfortable about the company they put their money into, and the ideas or social values of the company.

Trick or Trend?

My first reaction to this theory was surprise, an investor would typically put their money into a company that would make profits, and it’s that simple. The idea of investing is to generate a profit from a company or product that has the potential to succeed. The stock market is an ugly place where one is constantly trying to get the edge over another. Then when you really think about it, do you want an unethical, immoral or harmful product to succeed? Do you want to support a company that blatantly destroys the environment? Do you want to be the one making a profit of the suffering of others?

That’s what this topic really boils down to, the moral aspect of things. Feeling good about your choices and decisions, being able to sleep comfortably at night with yourself and the things you have done during the day. Why else would an investor even think twice about throwing money into an up and coming business? The market is tough enough without thinking of secondary issues outside of profit margins. Issues like the environment or social well being.

 Just like any other moral or ethical issues, this ones a debatable for either side. On one hand the stock market is a place to invest and try to turn a profit, on the other, who wants to support unethical behavior. After brief interviews with local investors, I found that this idea was not as important you may think. With so much trading and movement in today’s market the average investor needs to think quickly, and move fast to capitalize on market trends.

Taking chances may not be the safest way to invest, but those investors who conduct constant trading and trying to make a profit in the market often don’t have the bio on a given company. For short term investing social ideas may not even be a thought. 

Long term investing is where social status comes into play a little bit more. Even based on market statistics, social investment generally do not provide as high a return as a regular investment. After researching the trend, most information shows higher fees for investors and lower returns to take part in social investment “groups”.

What is the cost of comfort? How much would the average person be willing to lose for the comfort of ethics? “Two-thirds of American consumers report having a greater degree of trust in companies aligned with a social issue; nearly the same number think cause marketing should be standard practice for businesses.” (Marconi 2002)

“Part of the whole trend of social investing is influence. These groups get together to invest, and then influence the company by voicing concerns at shareholder meetings or by gaining a controlling portion of the company stock. The benefit is being proactive against something you feel strongly about, the negative side is the time and effort it takes to actually make a difference.

Social investing make up only a very small portion of total investments, but in light of recent corporate mishandling, the trend seems to be on the rise. Investors now want to feel secure and know what’s going on with their investments. With so many examples of bad investments, or corporate scams, the trend looks to be a more popular way of safely investing.