Ask the madman: are your investment companies socially responsible? – Publish the newsletter

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How to invest in socially responsible companies? – DL, Monticello, Minnesota.

The easiest way is to park your dollars in one or more mutual funds – or exchange-traded funds (ETFs) – that follow socially responsible guidelines. That way, you let the fund managers do the research and make the buy and sell decisions. Or, in the case of passively managed funds, you simply invest in the same securities that are part of a socially responsible index. Some will have the acronym ESG in their title, which means they focus on environmental, social and governance factors. Also note that some of these funds invest in companies that perform well in terms of socially responsible measures, while others simply exclude companies that do not.

Some funds you might consider include the Vanguard FTSE Social Index Fund Admiral Shares (VFAX), iShares MSCI USA ESG Select ETF (SUSA), and Vanguard Global ESG Select Stock Fund Investor Shares (VEIGX).

You can also invest in individual companies that you select yourself, but first you will need to decide which issues are most important to you. For example, you might consider the environment; gender equity and diversity; working conditions and other human rights issues; and if you are willing to support businesses involved in gambling, tobacco, guns and / or alcohol. Few companies will be perfect on every problem. Learn more about GreenMoney.com, CorpWatch.org and CSRwire.com.

What is a sector? – CF, Erie, Pennsylvania.

A. The words “sector” and “industry” are often used interchangeably, but sector often refers to a larger segment of the economy. The industrial sector, for example, includes the airline industry as well as the construction industry, while the healthcare sector includes everything from hospitals to medical device manufacturers and biotechnology companies.

Invest in retirement

It’s easy to imagine that after you have saved and invested throughout your working life, you will stop doing so when you retire, perhaps selling your stocks and guaranteeing your assets in safer places such as certificates of deposit (CDs).

However, there are good reasons to keep investing in stocks. After all, if you retire, say, at age 65 and then live to age 95, you envision a 30-year retirement, a long period during which your money would likely have grown a lot if it had been invested. in actions. The trick, then, is to keep out of inventory all the money you think you’ll need within five years (or 10 years, to be ultra-conservative) – because in the short term, as we were recently reminded, anything can. to arrive. The rest of your money can stay invested in stocks in order to grow.

You can consider bonds for a chunk of your money, as many retirees do, but be aware that stocks will almost always do better in the long run. Business professor Jeremy Siegel’s research found that between 1871 and 2012, stocks outperformed bonds 78% of the time in all 10-year periods, 96% of the time in all 20-year periods, and 99% of the time. time about every 30-. periods of one year.

Another smart retirement decision is to invest in healthy, growing stocks that pay dividends because they will generate income without you having to sell stocks of your holdings. If you have, say, $ 200,000 invested in dividend payers who have an overall average dividend yield of 4%, you can expect annual income of $ 8,000 or more, as dividends also tend to fall. increase over time.

By continuing to grow a large portion of your portfolio throughout your retirement, you can protect your assets from inflation, which reduces the purchasing power of money over time. Inflation has averaged around 3% a year over long periods of time, enough to roughly halve the purchasing power of your money over 25 years. If planning for retirement troubles you or worries you, talk to a financial advisor. You can find one near you at NAPFA.org.

Falling into the hype

My dumbest investment was to invest in the shares of a company that had innovative, apparently environmentally friendly fracking technology: pumping a propane gel deep into the ground to release natural gas instead. to pump water, which would be polluted. (The propane was salvaged above ground.) This technique was supposed to revolutionize the hydraulic fracturing industry, but my shares went from around $ 10 a piece to bankruptcy, which the company filed in 2015. It was the first and last time I bought a business without doing fundamental analysis before buying. It was a great learning experience about dealing with the hype. – SH, online

The Fool responds: It was a classic penny stock fiasco. Digging online, you can find snippets touting the unprofitable small business with words like this: “amazing new technology – that will fuel the mega-trend in hydraulic fracturing for decades.” “It’s a fortune in the making. Keep reading to find out how you can collect your own, from now on.” “In addition to immediately addressing all environmental concerns associated with hydraulic fracturing in the United States, there is a very real possibility that this company’s technology will in fact be MANDATED … by all oil and gas producing countries in the United States. the world.”

Breathless language like this is a big red flag. The company’s technology was intriguing, but it would have been better to watch it for a while, while waiting for it to establish a history of growth and profits.

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