Any investing can be Socially Responsible Investing [foundry mailbag]

Last week was Gold Week here at the Foundry, and the past few weeks are turning into Investing Week, a topic that I’m still learning a lot about and totally fascinated by.

Foundry Friend and reader Betsy commented with a great suggestion for a topic, so-called “socially responsible investing” or simply “social investing.” She writes:

I would be interested to hear your thoughts on having one’s investments match their values, even if it means lessening returns.

In fact, Venessa recently asked “Exactly which companies are these index funds investing in?” And we both had an “ew” moment when we read down the list. Most were companies we dislike or distrust, and a few are brands we actively boycot!

So what’s going on here? Is there a way to reconcile the wisdom of diversified index fund investing with one’s personal values? Or does the conscientious investor just need to hold one’s nose while building wealth?

For most people, investing is really going to be a little of both. Apparently there is a way to attain an acceptable level of diversification while limiting investments to “socially responsible” funds, at least according to this academic paper. Maybe this is callous of me, but I don’t really have time to read academic papers, and to pick and choose funds. I have a “set it and forget it” method to investing.

However, there is a bright side. I’m here to argue that one’s level of social responsibility is determined less by the investments themselves, and more by what you do with your life once you’re living off those investments.

If someone lives the Foundry lifestyle and becomes financially independent at age 40, they have the opportunity to spend the majority of their adult life doing whatever moves them. Personally, I plan on spending much of my time volunteering and that’s what lets me sleep at night, regardless of what’s in my portfolio. I know that I have a finite number of years until I reach this goal, and that my investments are a means to a very socially responsible end.

In my next post, I’ll discuss a method of investing that I feel is very socially responsible that won’t replace the traditional index fund investing style, but is a good way to complement it.

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