Investing With Your Values — Book Review

Investing with Your Values (aff.) is a must read for investor who’s concerned at times about the companies they might be involved with. It’s about 10 years old, so I wouldn’t say it’s a must-buy. Some of the information is really out of date and some is pretty much always applicable. But if you can’t get a copy from your library, used ones are pretty cheap on Amazon.

The best part is Section Two: The Four Spokes of the Natural Investing Wheel.

This section outlines the four strategies you can take if you want to invest more ethically. They are: Avoidance Screening, Affirmative Screening, Community Investing, and Shareholder Activism.

Avoidance Screening involves coming up with a filter to figure out which companies you definitely don’t want to invest in. For instance, lots of people don’t want to invest in Philip Morris/Altria because it makes cigarettes. Some people might not want to invest in weapons manufacturers.

Affirmative Screening is seeking out companies particularly because they’re doing some good in the world. Maybe you’re excited about how a company is developing alternative energy and you want to support that.

Community Investing is done through banks and other places which are specifically intending to help people. Kiva doesn’t return interest, but it comes to mind.

Shareholder Activism can be done with stocks you already hold. For instance, you might organize a campaign to have the company change their policies or investments. Lots of companies in the late 80s and early 90s were pressured by shareholders to divest from South Africa because of apartheid.

Some people might simply want to avoid bad companies. Others might do a combination of all four strategies.

Downsides

This book was written in ’98, when stocks were still soaring. It definitely has a lot of 90s optimism and sometimes feels dated.

The first section is pretty much an argument for “natural investing,” which might not matter to you if you’re already interested. Plus, all their numbers are 10 years old. And we should remember that past performance doesn’t guarantee anything in the future. So unless you’re in a reading mood I’d advise skipping it.

The third section includes “nuts and bolts” like what stocks, mutual funds, CDs, and the like are. You may not need any of this information. It also has information on socially-screened mutual funds which may or may not be around anymore.

The last part is a reference of actual stocks and such. I completely skipped it because the companies might well have changed in the last 10 years.

Thoughts

One of the most interesting funds they mentioned was the Domini 400. It’s basically the S&P 500 with some funds screened out (avoidance filter) and other, theoretically similar funds added (affirmative filter). According to this more recent chart it does a great job of mimicking the S&P 500. In fact, it does very slightly better most of the time.

Again, past performance doesn’t guarantee future performance, but it does show that the people running the Domini 400 are pretty good at following the S&P and the market. We get into the S&P because it tracks the market. So if this one does too, you might want to consider it further.

Like any index, the Domini is a package deal. It doesn’t let you pick and choose any further. So you may find yourself investing in Coca Cola, for instance, which is said to be a good investment but which also has faced some hefty human rights accusations. But you won’t be invested in cigarettes. Maybe you want to do somewhat better than you might do otherwise but you feel the world is too complicated to screen out everything.

After all, by buying groceries at Giant, I’m supporting the companies who made those products as well as the people who work at Giant and whose salaries I’m paying. I can’t guarantee that all that money will go to good stuff.

Basically, if you’re going to invest you can make choices to stay out of certain areas. That may or may not lead to trade-offs in ROI, depending on what you choose to invest or not invest in. Their take is pretty positive and I think they show some good examples.

Buy or Don’t Buy?

Read, unless you are really able to separate your ethics and investing into two separate categories. I’m not saying you have to change your investments, but it helps to think about it and use their evaluation criteria.

I think it’s definitely a “borrow.” Or read my review and get the overview of the best part. Or skim it in a bookstore with a coffee. If you have no other way of getting it, it might be worth buying used and cheaply on Amazon. Even with S&H it’s about the same price as a nice cup of coffee.

As always, MM is not an investment professional or a personal finance professional or any kind of professional. Unless you have an editing question or want to know the Dewey Decimal number for a book/section. Then maybe she can help you. This book was 332.6. She’d also recommend 332.024 for all your personal finance needs.

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