Local Investing

When you think of investing, do you picture a website with a neat summary of your portfolio?  Unless you are an accredited investor (meaning you have at least $1 million in net worth not including your house), your options for investing are a limited menu.  No matter what the name of the product (mutual fund, ETF, stocks), you are investing in companies that are publicly traded.  What if instead you could invest in the bookstore or restaurant that's opening down the street?  "Right now, around the country, groups of citizens both small and large are reclaiming their money as a force for positive social change," wrote James Frazier, one of the founders of a Local Investment Opportunities Network (LION) in Port Townsend, Washington.  His group is spreading the word about the effect they've had within their small town.  Here's an article he wrote that tells their story.

I am part of a group in Bellingham that is creating a similar network called the Whatcom Investing Network (WIN).   WIN is not an entity - it's basically a loose association of individuals who are all interested in making local investments.  It's a forum for us to meet each other and for businesses to meet us.  Check out this lil video of me talking about WIN at the recent Business Alliance for Local Living Economies Conference:

We just had our first meeting of investors this Tuesday.  Leading up to that, our organizing group has been enjoying such activities as studying the securities law.  The existing securities laws were put into place around the Great Depression as a way to protect investors from being scammed out of their life savings.  They are restrictive and complicated but we've mostly figured out how they work and how we can work within them. 

Here's how it might work: Harold is trying to open a chocolate shop.  He will register with the state Department of Financial Institutions that he is planning to ask for private investments, but only up to 35 non-accredited investors and only within Washington State.  He will submit his business financials and pay $50.  Then, Harold will present to WIN members and he will let us try his delicious chocolates.  At the end of the presentation, Maude and Ruth are interested in more information.  They might meet together to research the investment opportunity and perform due diligence.  Then they could meet with Harold and come up with an agreement.  Perhaps Maude will loan $10,000 and receive a weekly box of chocolates and Ruth will loan $5,000 over 5 years and get 6% interest.  Just an example, but I like this model in general for its flexibility.  It certainly has a greater burden on both the business and the investor - it's not just a quick fund transfer - but it's your money, shouldn't you be keenly interested in what it is doing?

Check out our website at whatcominvesting.org for more fun.

Your 401(k) is Lame

Remember that other time when we talked about community investing?  Yeah, that was fun.  But now you've forgotten about it.  Here's a list I've been compiling of other places to make alternative investments.  With funds like these, you generally have to get in touch with a staff person and "make an inquiry."  They want investors who are really interested in what their money will be doing, not just how much interest they will get.

Come on, people.  Take your money (or some of your money) out of dumb ol' aggregate index funds and force it to do awesome things:

•  Equal Exchange (a fair trade coffee/chocolate cooperative)
  -You can invest in stock at a min of $10,000 for a min of 5 years, usually 5% interest.  Equal Exchange is a worker cooperative; they can reject any investor they please.  I'd suggest this investment if you are really into cooperatives (like me!).
  -You can invest in an Equal Exchange CD for a min of 3 years, usually 1% interest.
• LEAF Fund (job creation in low income communities)
  -min investment $5000 min term 2 years, usually 1-3% interest
  -55% of loans to consumer food cooperatives
  -25% of loans to worker-owned cooperatives
  -the rest to alternative staffing organizations and cooperative manufactured home associations (eg buy the land your trailer home is on as a community)
• RSF Social Investment Fund
  -min investment $1000, min term 90 days, current interest rate 1%
  -provides mortgage loans, working capital lines of credit, and inventory financing exclusively to non-profit and for-profit organizations dedicated to improving the well-being of society and the environment
• Community Economics Investor Note
  -min investment $2000, 1-10 year term, 1-2.5% interest
  -channels investment capital to community land trusts, limited equity cooperatives, and community-based nonprofit organizations creating housing that is permanently affordable to low-income people
• The Carrot Project (local food production in the Northeast)
  -Seems cool. Unclear whether they are currently accepting investments.  Get in touch with them if it looks interesting to you...
• Cooperative Fund of New England
  -min investment $1000, no set term, 1-3% interest
  -invest in cooperatives in New England.  pretty obvious.  They are totally solid.  I don't know what I'm waiting for to invest with them.
• New Spirit Ventures (sustainable agriculture)
  -I literally just heard about them yesterday.  Make an inquiry to find out more.

If you haven't noticed, I'm getting really jazzed up about cooperatives.  Perhaps a post on that soon.

SPECIAL BONUS MAP:

Slow Money is a group that facilitates investments in small farms. Check this out to find a way to invest near you:

Slow Money Financing Programs Map

This is a working map of debt and equity programs across the US that are relevant to small- and mid-sized agricultural producers.
Mapped by Alex Moore, http://www.breadrising.com

View Slow Money Financing Programs in a larger map

Note: if a fund says "accredited investors only," that means your net worth must be at least $1 million to invest.  Usually there is a $100,000 minimum investment for accredited investors.

Community Investing: Move on Up

I have something you will like, my little friend.   It is community investing! It is fun, easy, and delicious.  I just loaned The Reinvestment Fund, based in Philadelphia, some money for a term of 3 years at 2.50% interest.  My investment is basically a CD (certificate of deposit) and I can't get at it until the term is up without penalties.  What is my money doing during those 3 years? Increasing fresh food access in low income communities, building energy efficient affordable housing, and financing charter schools in the Greater Philadephia area.  It feels like I'm making a donation, but I'm getting it all back! Plus interest - a lot more interest than most savings accounts or CDs are getting nowadays.  You'll probably want to start listening to Move on Up immediately because it will last for 9 minutes.



More generally, community investing is "financing that creates resources and opportunities for economically disadvantaged people in the US and overseas who are underserved by traditional financial institutions. Community investors make it possible for local organizations in rural and urban areas to create jobs, provide financial services to low-income individuals, and supply to capital for businesses, affordable housing, and vital community services, such as education facilities."  This definition is from The Community Investing Center, an extremely useful website, really the only useful website about this.  When I searched their database, I wanted to find an institution in Greater Philadelphia, but there are lots of parameters you can select.

There are so many options! The Cooperative Fund of New England finances cooperative housing, worker-owned businesses, and community-oriented non profits in New England.  Owen's housing coop got a loan from them last year to finance maintenance on their coop house. Oikocredit requires a minimum investment of only $20 to invest online in global microfinance.  Pick a global one or a tiny local one.  Four Bands Community Fund loans only to the Cheyenne River Indian Reservation in South Dakota and offers investors interest rates of 0-4% for loans longer than 5 years with a minimum investment of $5,000.  I bet you will find something intriguing.

Minimum investments vary, but many I've seen are about $2,000.  Each fund also has a different investment term, sometimes one year, sometimes three.  Generally the investor can choose up her interest rate (up to a maximum), allowing investors to select less if they choose to be more generous.  This article by Timothy Freundlich (a Wes film major, surprisingly) offers a better primer on community investing than I have here.  I'm just here to get you psyched.  Look, from a pure investment standpoint, where else are you making a sure 3% right now?  Plus your money is being awesome when you make a community investment.  TO THE DATABASE!