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.

Socially Responsible Investing

If you're a bold little saver, you're probably taking advantage of your employer's 401(k) or IRA plans. Yay saving and investing! But wait, a dark cloud looms. "Investors - if unconsciously - silently provide the fuel that keeps the world economy moving, unaware for the most part of the companies that use their savings" (Landier & Nair). Having a retirement fund like a 401(k) or IRA means you own shares in the stock market. Maybe you have an index fund. Here's a fun task: check out your fund's top ten holdings - the ten companies that your fund owns the most shares of.

Here are the top ten holdings for my Roth IRA, which holds shares of the Vanguard 500 index fund:

1		Exxon Mobil Corp.
2		Apple Inc.
3		Microsoft Corp.
4		Procter & Gamble Co.
5		General Electric Co.
6		International Business Machines Corp.
7		JPMorgan Chase & Co.
8		Johnson & Johnson
9		AT&T Inc.
10		Chevron Corp.

AHHHHHHH!! I am a tiny shareholder of ExxonMobil? This news was unacceptable to me, but I guess it shouldn't be surprising. I began to research options for "socially responsible" investing, or SRI. First I looked at Vanguard's Social Index fund, which "invests primarily in larger U.S. companies independently screened to meet stringent social and environmental criteria." these are its top ten holdings:

1		Apple Inc.
2		Procter & Gamble Co.
3		JPMorgan Chase & Co.
4		Wells Fargo & Co.
5		Bank of America Corp.
6		Cisco Systems Inc.
7		Oracle Corp.
8		Google Inc. Class A
9		Intel Corp.
10		McDonald's Corp.

Um, seriously? Trading big oil for big banks isn't exactly the kind of responsible I meant. Also, any hurdle set low enough for lardass McDonald's to jump over is not high enough for me. So from I started researching. I read some books. Amy Domini, who started Domini Investments, wrote Socially Responsible Investing: Making a Difference and Making Money in 2001. She outlines that "three basic aspects to socially responsible investing are screening portfolios, direct dialogue with corporations, and investments in community development financial institutions." Vanguard's Social Index Fund is a screened portfolio, meaning that it just takes out really "bad" companies like oil, weapons, tobacco, gambling, etc. Direct dialogue involves writing letters to Boards of Directors and trying to convince a companies to move towards more responsible choices. That is time consuming. Community investing is very cool and I will write about that in a separate post, but for now I want to focus on more mutual fundy things.

The best book I read on this subject was Investing for Change: Profit from Responsible Investment (Oxford University Press, 2008) by Augustin Landier and Vinay B. Nair. They posit that "acting as a shareholder might be faster and more effective than acting as a citizen." Their approach is pretty economic/academic - they're out to prove that SRI isn't just a whimsical hippie thing, and that it can be just as profitable as non-SRI. This counters the widely-held belief that in order to make ethical investments, you have to forgo big profits. Augustin and Vinay say that ain't true.

They also bring up some good questions. Is your investment helping a smaller, more responsible company compete? Is it showing big companies that they can be more profitable by being socially responsible? This is a good point because so many of the screened portfolios, like Vanguard, are full of companies that aren't ExxonMobil, but aren't impressive at all. And I've got to be impressed, dammit. So I started focusing on renewable energy funds, because I'm willing to gamble that small geothermal, wind, and solar companies will grow in the future. And now I'm entering a world of pain, full of 100-page prospectus PDFs and acronym glossaries as I compare the various funds and options. Coming soon: I will publish a post on what I've learned so far about evaluating mutual funds. The most useful research site for this is socialinvest.org. Anyway, the point is, be aware of where your money is and what you are supporting. Creepy closing fact from Augustin & Vinay: "in 2007, of the 100 largest economic entities in the world, 32 are companies, not countries."