Are Your Investments Working Against Your Philanthropy?
Finding the Answer May Be Harder to Learn Than You'd Think
Your investments work for you 24 hours a day, 365 days a year. What are they doing? Does that work align with your mission and values?
Investing is hard. Like, really hard.
It’s easy, of course, to buy a stock. Especially today. It has never been easier. Many online brokerages don’t even charge commissions anymore. It’s so easy.
But really investing to earn a return over time that will help you achieve financial goals, like being able to retire someday. That is seriously hard work.
One way to make it easier is to hire other people to do it. There are easy ways to do this, like buying mutual funds and ETFs. An ETF is an exchange-traded fund that trades like a stock but represents ownership in a portfolio of stocks, similar to a mutual fund.
Choosing funds is almost as tricky as selecting stocks. Broad funds like those that track the S&P 500 index or the Nasdaq 100 invest in many individual stocks. Funds are not required to disclose every stock they own—only the top ten largest positions. Depending on the fund, it may be challenging to learn where managers invest half or more of the money.
Of course, you’re likely to argue that not knowing is entirely the point. You may be a doctor, lawyer, successful entrepreneur or big-time executive and may not want to worry about your money. You want someone else doing that for you.
Here’s the thing. If you are concerned about climate change, you may not want to own oil and gas stocks. Do you own some? If you invest in funds, it may be challenging to find out.
My Portfolio Purge
For years now, I have been actively managing my portfolio. In the early part of this century, I ran a FINRA-regulated investment banking firm. We also set up a registered investment advisor to manage a hedge fund (which bombed). For better or worse, I still feel comfortable picking my stock investments.
For good and bad reasons I won’t explore, I’ve kept a few funds in my portfolio. These include both the SPDR® Dow Jones Industrial Average ETF Trust (known more often by its ticker, DIA) and the Invesco QQQ Trust. The former tracks the Dow Jones Industrial Average, and the latter tracks the Nasdaq 100.
I can’t lie. I have always known that one or more of the stocks in the Dow is an oil and gas stock. I checked this morning. Chevron is currently in the mix. The result is that I had invested about 0.03 percent of our retirement funds in a stock I don’t want to own.
So, I sold our shares in the fund this morning after holding them for fifteen years. I no longer own, even indirectly, any shares in Chevron.
Similarly, I’ve owned the QQQ for a few years. I have always thought of it as a tech fund. Well, a little research taught me more than I wanted to know. The index includes several utilities. I’m a bit of a fan of electric utilities. I see them as growth stocks as the world converts to electric vehicles.
But some utilities are in the business of extracting natural gas. That’s a business I don’t want to invest in. So, I sold our QQQ shares this morning, too.
I am a big fan of and have written extensively about impact investing. The basic idea is that you can invest in things that align well with your mission.
Frankly, it is pretty easy to do if your mission is to fight climate change. I have a dozen stocks in my portfolio that are bets on solutions to climate change, from electric charging technology to clean hydrogen investments. Some are ridiculously speculative. I won’t name any of them here to avoid giving even the slightest hint of investment advice. That isn’t the point of this post. There are lots to choose from, including some funds that reduce your risk.
There are easy ways to invest in community right now. There are lots of funds that invest in municipal bonds. Of course, you can also buy specific bonds from your state or local government. Buying individual bonds is a bit more intimidating than buying stocks, at least to me.
It is harder to invest directly in solutions to poverty.
Investments in healthcare sometimes make me cringe as I consider the enormous profits some are making in that arena, but there are plenty of investment opportunities.
There is a minor critique of buying shares on the secondary market. When we buy shares of a company already trading on the stock market, the company doesn’t get any of that money. The person or entity that sold us the shares gets our money. Therefore, the argument is that our money didn’t have any impact.
Still, I sleep better at night knowing I’ve got money riding on solutions to big problems.
And tonight, I’ll sleep better knowing I don’t have investments in oil and gas companies.
Wealthy people could always invest directly in companies even before an initial public offering that makes the stock available to the rest of us. A decade ago, President Obama signed the JOBS Act, allowing ordinary investors to put money directly into companies more easily.
Two new rules allow this. One is Regulation Crowdfunding, commonly called Reg CF by those who play in this space. The other is Regulation A+. Companies can raise up to $5 million with Reg CF and up to $75 million with Reg A+ without limiting themselves to wealthy investors. Anyone can invest.
Investing in private companies does have a more significant impact than buying shares of large public companies, but it is so much riskier. I love investment crowdfunding. You’ve seen me write about it at some length before. I plan to slowly put about 1 percent of our net worth into such investments. I share that detail to give you a sense of the risk.
At the same time, when lots of people put a little money together, big things can happen. We who invest can take pride in that.
Every month now, I’m hosting the Impact Cherub Club, where we actively discuss making tiny investments in these little private companies working to solve big problems. Learn more about the Club here.
In September, I’m hosting SuperCrowd22, the biggest impact crowdfunding conference of the year. We have dozens of speakers already committed, plus a live crowdfunding session where we’ll hear from companies raising money! Free Superpowers for Good subscribers get 50 percent off the list price here of $199, and our paid subscribers get in free!
Here’s your homework:
Learn what you already own.
With advice from tax and other experts, sell what you don’t want.
Look for and buy more mission-aligned investments.
Bonus: join the Impact Cherub Club and attend SuperCrowd22.
You can align your investments with your values so that your philanthropy isn’t just unwinding the problems your money created. Have the impact you want from the start!