Thinking about investing in 2011

Fifty years ago, if you asked an average middle-class investor “why do you invest?” chances are they’d say something about believing in a company, wanting to support it, becoming a part-owner of the company, and making a return.  In these days of mutual funds, it’s quite likely the only answer you’d get is “to make a bunch of money.”

I own a fair bit of stock; I’ve worked for most of my career at places with very nice retirement plans and an excellent employer match.  And I have no idea what companies I’m investing in.  I know one of them is a “socially responsible” fund (which, by the way, has outperformed pretty much everything else in the last ten years, and which people tried to talk me out of because the growth funds had such a good track record in the ’90s).  It doesn’t invest in tobacco or weapons, but does invest in pharmaceutical companies, which I suppose is better than tobacco, but not really what I want to be supporting, either.  As for the rest of it – who knows? Coke and Pepsi, for sure, and probably a thousand companies I’ve never heard of.

Add in the increasing volatility of the stock market and the growing understanding that the US economy’s “business as usual” isn’t going to last for much longer due to the coming increases in fuel prices, and I’ve really been rethinking how I want to invest these days.  Here are my preliminary thoughts:

  • I want to invest in endeavors that I think will benefit the community. Building sustainable local food and fuel systems are at the top of my interest lists.  And “benefit”  includes returning a profit to the owner and investors; I’m tired of idealistic start-ups that can’t sustain themselves once the start-up money is gone.
  • Small-scale investing and microfinance look a lot alike. If I’m loaning money to someone to start a business, the difference between a micro-loan and an investment is that the loan is paid back on time with a set amount of interest; an investment is paid back as a percentage of returns.  But they accomplish the same thing: I help fund the business, and I can reasonably expect to make my money back with a little extra.  And actually, since I’m accustomed to charitable giving, just making my money back is a lot more “return” than I often see on my money.
  • I am willing to work outside of traditional investment structures with part of my money. At this point, I still plan to participate in my company’s retirement plan, because not doing so would be in effect a 10% pay cut.  However, we are starting to get to the point where we’ve got enough months’ worth of expenses in the bank that we have some money not designated for “emergency” or “retirement.” With that money, I would be willing to think about microfinance-type investment. At the same time, I’m leery of doing all the credit risk analysis myself. It could be a huge time sink and stress to figure out whoto lend to.
  • Money be the vehicle to let me do some of the things I don’t have time to do myself. I don’t have time or expertise to make happen all the ideas rolling around in my head, but I do have a good job and a little spare cash.  Working with other folks, that spare cash could potentially accomplish more than I could if I quit my job and worked on those projects full-time.

Difficulties that will need to be addressed:

  • Figuring out who to invest in.
  • Mechanisms for doing that investing. TIAA-CREF doesn’t have an “invest in Washtenaw County” fund.

Possible solutions to investigate:

  • The Farmer Fund and Small Farms – Small Farmers Initiative. This is the very first place I’m going to look.  Put together by Jeff and Lisa of SELMA fame, it funds the building of local hoop houses.  Last time I checked, it was just getting off the ground, and still at a fairly informal stage.  Definitely time to check back in with them and make something happen.
  • Buying stock in individual companies instead of mutual funds.  This is still going through the stock market, which makes me a little nervous, but it’s worth looking into.

What would I really like to invest in?

  • Local food infrastructure. Farms, processing, etc.  Seed cleaning and saving.  Slaughterhouses and meat processing.  Cheesemaking. Co-op flour mills.  Anything that helps make the leap from farm to groceries.
  • Sustainable energy. Wind farm, biofuels (willow coppice, for example),  hydro, passive solar.  Perhaps energy-saving renovation techniques.
  • Sustainable, community-based health care. Not million-dollar machines; just good, solid health care that people can afford with or without insurance.

Things I’m not interested in investing in:

  • Photovoltaics
  • Backyard gardening – that’s a volunteer/charity item. I don’t expect to make a return on helping people start backyard gardens
  • Projects that can’t eventually be scaled to serve several hundred to a few thousand people.  So for example, funding biodiesel setups based on waste cooking oil.  There just isn’t enough fuel stock for that kind of thing to scale appreciably.

Anyone out there have ideas of ways to invest according to this vision?

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2 Comments

  1. Clay Ivy said,

    January 1, 2011 at 5:22 pm

    Very nice! I totally agree with on local food infrastructure. There will always be people to feed, and people are finally becoming concerned with how food is being grown. I write to try show people the good side of investing. I agree not as many people invest with the intention of owning a great company. I suggest looking toward Warren Buffet for advice on ethics and investing.

  2. January 3, 2011 at 8:32 am

    If you haven’t already, you might check with local non-profit organizations that have similar interests. If they are doing some of the work you want to support — like our local Sustainable Energy Network — you can invest in them. But they might also be able to point you to local businesses or new initiatives that could use some funding. Local investing is definitely starting to take off, so this is a great time to check into it. Go you!


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