Ethics and investments

[laohaire]

I know MDC is a little out there but I have a feeling I'm going to be even further out on the fringe than most. But let me at least give this a shot.

DH and I decided we do not want to participate in the stock market any more. There are practical reasons for it but there are ethical reasons as well. DH has observed that large companies do unethical things due to the pressure to constantly perform better than last year. It's not enough to be insanely profitable, the stock market dictates you must be consistently MORE profitable over time. That forces companies to do unethical things: automate and fire their workforce, outsource to companies that abuse their workers (even children), unethical marketing tactics, etc. Greed is a reality even without the stock market, but the stock market just pours fuel on the flames. We don't want to participate anymore.

So we're looking at investing into bonds. They avoid the issue I described above. But there are still ethical issues. For starters, it's perputating a system of debt, particularly an issue with government bonds. Also, for coprorate bonds, you have your choice of buying bonds from huge, huge corporations - or taking on the risk of junk bonds. Junk bonds might be ok for professionals who research the hell out of a company and will scour their P&L statements and so on, but DH and I are just a couple of lower-middle class folks trying to scrape together a retirement. We don't even have much money to invest in it, due to minimums it looks like we'll buy 2 bonds and that's all we can afford.

So we're looking at bonds, and everything is a problem. Hershey's is offering one at a good rate. But the chocolate industry is horrible. There was an oil company. Procter & Gamble. Haliburton. I am not comfortable supporting these companies.

What are people to do? I hate that I have to choose to play this game. Well, don't play it, you say? Gladly, but if I stick my money under my mattress I will be working until I'm dead. My goal is not wealth. I don't think it's greedy of me to want to plan for my older years.

I don't have enough money to invest in real estate. I don't have enough money to fund a new business. I can buy a CD or use a savings account, but then I'll be eating dog food when I'm 85.

I don't know how to deal with money and ethics. I want to opt out and I hate that I have to choose between supporting business practices I disagree with and working until death or depending on welfare or my daughter.

There has to be another choice.

[Caneel]

If it makes you feel any better, the majority share of Hershey stock is owned by a trust. This trust runs a fantastic school for underprivilledge/under served children. The academics are top notch, the campus is beautiful and it is a terrific employer in the community.

[Teenytoona]

I wonder about this too... I don't like the idea of 401K and investing, because they're always companies that I cannot get behind.

My oonly big idea is gold. But I don't have any, it's just a someday thought.

[Juvysen]

[laohaire]

Originally Posted by Teenytoona

I wonder about this too... I don't like the idea of 401K and investing, because they're always companies that I cannot get behind.

My oonly big idea is gold. But I don't have any, it's just a someday thought.

You get me!!!!!!!!!!!!!!!!!

Sigh. It's funny, I was all nervous opening up the responses.

I'm always telling DH, "let's move to Canada" "let's move to Venezuela" "let's join The Farm" like any of it would really help....

[Juvysen]

My mom's husband has started buying gold (and silver) coins instead of stocks. 1) they're a collector's item, so they're worth more than just the cost of the gold, and their value will increase 2) if the economy crashes, they're still made out of gold, so they'll carry value. Or at least that's his line of thought...

[Monarchgrrl]

I'm with you! I don't/won't participate in the stock market. DW has a 401K that she's had for years and she is trying to figure out what to do with it when she stops working in October. We're going to research moving it all to an ethical mutual fund, possibly. I'm not sure what exactly because we haven't started researching yet. But I'm with you!

[GuildJenn]

There are mutual funds (here anyway) that use social responsibility as a factor, but they are still profit-driven. They're usually called ethical funds or SRI funds. I think this is a reasonably good site in the US (but check it out, I'm not an expert): http://www.socialinvest.org/

I'm not sure I would go this route but you could buy stock directly in companies you support, perhaps focusing on the green economy. Just be diverse.

There are other ways to invest - real estate, like you mentioned; you'd have to save up for a down payment on an income property though; investing in your own business or partnering with someone; micro-lending. But these all have risks too.

[dbsam]

There have been threads about this topic in the past that might have useful information.

My husband and I struggled with this issue years ago and still do. Although we still own stocks and mutual funds we purchased years ago that we would not purchase today, a while back we decided… we try to shop with our conscious why aren’t we investing with those same ideals? It helps to have a broker who understands and shares this mindset - he's made suggestions we would not have thought of on our own. However, it can be difficult and sometimes we need to choose which ideals are most important to us. This desire to invest with our principles in mind, and the fact that I’ve made some horrible investment decisions in the past, have caused us to keep too much in cash always thinking we will have time to research but never making that time. Working towards our goal, we have purchased stock in companies we support and have invested in SRI funds. (We are not getting rich quick!)

I look forward to reading how others handle this dilemma.

[EmsMom]

Well, I am just throwing out some thoughts here: You could invest in yourself and your family. Spend money on an education. Money spent on securing a home and food supply (ie: homesteading). Invest in a community: communal living? Religious communities in particular have a history of providing for the aging by taking in new younger members (ie: monasteries, Bruderhof, etc.) Invest in relationships so that you are putting lots into relationships now while you have time and energy, caring for your children and family

I also think that by living consistently far below your means (realizing it is possible for some and not for others, of course), you can just park extra money in simple savings instruments. You could not expect to out-profit inflation, but if at the same time you are building a life that doesn't require much infrastructure (work from home, walkable community, home food production, etc), that could work too.

I am also a very big believer in taking care of your body, mind and spirit as a type of investment. Having a healthy lifestyle can really guard against the necessity for large investments by ensuring you a lifetime of capable, fulfilling work of many kinds.

Financial investments in socially responsible investing can screen out the worst of big business. Micro-lenders can help very small business owners around the world and return a small profit to you. You could also invest in local small businesses that you believe in or local real estate -- I am just imaging a group of people buying up houses in sub-prime land, renovating them by sweat equity and then renting them out at below market level prices to screened people. Profit from rent, reinvigorating a torn up community.

Well, I guess my point is that if you use imagination, there are definitely possibilities...

[velochic]

This is my opinion. The problem is that once money is out of your hands (physically), it is out of your immediate control. That is, the money is only yours electronically. Once it is out of your control, it's hard to make sure it is being used ethically.

Take simple savings for example. You might put your money into a savings account and think that you're being ethical, but that bank could be cooking the books or paying very unethical bonuses to officers (ala Bank of America, Citicorp), or just treating their employees like crap, etc.

Even the stocks that are so-called "socially conscientious" stocks will probably be doing some unethical (not illegal) things behind the scenes to MAKE MONEY.

And that's the problem. Any time you are making money, somewhere, someone is probably doing something unethical to make the money... and there is no way to know except in the most blatant examples. Even then, they're usually legal, just not doing things the way *I* would feel comfortable doing them.

I think that the only way to invest 100% ethically is to do as a pp said and invest it in yourself. Keep the money in your absolute control.

That being said, we choose to invest through several vehicles... mutual funds that include stocks, bonds, EFTs, REITs, etc., CDs, regular savings accounts, money market accounts, farmland, and structures. I can't control the ethics of these choices, so although I'd love to "make money" knowing that everyone out there adheres to my principles, I know that's not going to happen and I've had to just let that one go. For example, I know that the farmer who cash rents our land uses commercial fertilizer... I'd love for him to grow everything organically, but he has to make a living, and has to pay us, so we don't make any demands that would actually sit better with me, ethically. I just let that one go.

Good luck in your search!!

[sunflower.mama]

Would it make you feel any better to approach your investing from a totally different perspective, ie, those abuses will continue with or without your investment, but if you increase the return to your family unit, you will have more resources available at your disposal to do good in the world, practice responsible consumerism, buy organic, etc?

[laohaire]

Originally Posted by EmsMom

You could invest in yourself and your family.

Time with my family is a priority (DH and I work from home, for starters) so we've done this. But it won't solve our retirement - in fact, making this choice detracts from us being able to retire in the future.

Originally Posted by EmsMom

Spend money on an education.

I have a bachelor's degree, though it has only been an expense and not an asset. (I work for a high school dropout who couldn't care less about my degree, in fact a little bit demeaning about it). We are trying to pay off our degrees with a huge snowball effort in the next 3.5 years (we've been paying for 10 years now). More education won't help our retirement but detract from it.

Originally Posted by EmsMom

Money spent on securing a home and food supply (ie: homesteading).

This is a good idea but also doesn't address the fundamental issue. I could have a homestead but when I'm older and blind (I am already well over the legal definition of blind, and going to lose all my vision in the future) how will I retire? I don't think I can realistically expect to be mucking out stalls and processing chickens when I'm an 80 year old blind lady.

Originally Posted by EmsMom

Invest in a community: communal living? Religious communities in particular have a history of providing for the aging by taking in new younger members (ie: monasteries, Bruderhof, etc.)

I've thought of communal living and one of our primary (not the only, but certainly the top one or two reasons) is specifically that we're screwed for retirement. We looked into The Farm, for example, but how would we retire there without any nest egg?

Originally Posted by EmsMom

Invest in relationships so that you are putting lots into relationships now while you have time and energy, caring for your children and family

Does this mean that if I care for my child that I should then expect her to care for me in old age? I do think our culture has gotten it wrong when we shifted away from communities and generations, but at the same time I can't feel good about planning to saddle my child with my financial care, even if I do end up living with her. It would also require that my child make very different choices than me (she needs to be well-off enough to care for me as well as plan for her own retirement), and I don't want to place that expectation on her.

Originally Posted by EmsMom

I also think that by living consistently far below your means (realizing it is possible for some and not for others, of course), you can just park extra money in simple savings instruments. You could not expect to out-profit inflation, but if at the same time you are building a life that doesn't require much infrastructure (work from home, walkable community, home food production, etc), that could work too.

I do believe in this, but we make a very low income anyway. I do wish we had made different choices - for starters, we should not have gone to college. However, those choices are made and we are where we are. We have one car and even that car we get the low-mileage insurance rate, we have no cable or even Netflix, we do have DSL but we make 100% of our income off the Internet so it's not a luxury, we pay $8/month for one prepaid cell phone, our clothing budget is $0, etc. We are trying to pay off our student loans and mortgage but it's going to be a very long time. You might say that we shouldn't have gone to college and shouldn't have bought our (very modest, $85k) house but here we are. Selling the house just isn't viable in this market, and there's nothing I can do about the student loans. So we're really doing our best, but we are still going to be eating dog food at this rate.

Originally Posted by EmsMom

You could also invest in local small businesses that you believe in or local real estate -- I am just imaging a group of people buying up houses in sub-prime land, renovating them by sweat equity and then renting them out at below market level prices to screened people. Profit from rent, reinvigorating a torn up community.

I like those ideas too, but we haven't even paid off our own house, it doesn't seem to make sense to go into further debt to buy more real estate. Those are great ideas for people who already have money. We have invested in a business - my DH's - with the only money we could spare for it (it came to be about $1500 I think).

I guess I'm just struggling with the concept that we can either screw ourselves royally or play the game. I would not be struggling if the concept was that we could choose not to get rich by not playing the game, we are not going to get rich and it's not a goal. That's fine. I choose that. But I HAVE to play the game or live in a garbage can when I'm old, and I don't think that's reasonable.

I don't know if I'm making myself clear enough. I don't resent the idea that I can't be wealthy unless I make unethical choices. I resent the fact that I can't SURVIVE without making unethical choices. I don't think I'm a hypocrite or greedy to want to make sure that I don't have to be a blind beggar lady when I'm 70, and die in the street.

In case you're thinking I'm being silly or exaggerating, I have $6000 saved up for retirement at this point, all saved with a lot of struggle. OK, so I put that $6k in a savings account or a CD or something and bypass investing into business. I get 2%, maybe (less than inflation of course). In 3.5 years I pay off my student loan and then save $6000 a year for retirement (which also means I can't spare extra money to prepay my mortgage). Assuming I can work until I'm 65 (which I simply can't assume), I'll have about $250,000 saved up, all earning the 2% a year. I know these days people say 65 is early to retire, but again, I will probably be totally blind in my 40s or 50s at the latest.

$250k means I can live for just over 6 years assuming I need about $40k a year, which sounds high but let's not forget inflation.

Now if I choose what everybody chooses and make 8% instead of 2%, I'll have $750k in the same period of time. Obviously this is all hypothetical. But my point is, this makes a big difference. I can live about 20 years off of that.

So I can really hurt myself and not really make any difference. My not investing in these vehicles won't change the way anybody does business.

Or I can play the stupid game and grab the brass ring. And again, the brass ring for me is not wealth, it's just survival.

[Sarah W]

You could always invest in companies that you feel are ethical. When you invest, you are buying a portion of that company. Simply because they are publicly traded doesn't mean that they have unethical practices. Businesses aren't really pressured to perform better than the year prior, but people do expect them to make sound decisions and turn a profit. They are businesses, their job is to make money. It doesn't mean they need to lay people off or automate.

Like someone said, any time money is not under your direct control you don't really have a say in how it is invested. Even that .25% that you get from your checking/savings is invested by your bank. Really, the best thing to do is try to put your money towards causes that you find mesh with your own personal morals.

[DisplacedYooper]

I feel your pain, OP. I am in similar shoes. Although DH and I own some mutual funds, I'm not especially happy about it. Part of it is for the reason you describe, part of it is that I don't like being a part of what I consider to be an unsustainable economic system (based on annual growth) and part of it (outing myself as an official wacko here) is that I consider charging interest unethical.

But at the same time, I have to watch out for my family too, and we *live* in an economy with inflation (partly due, of course, to debt and interest...) and me putting my dollars under the mattress just ain't gonna cut it when everyone else in earning 8%.

The solution? I don't know. I am focusing right now on investing in companies that I feel are doing the least damage.

Sigh.