NY Times on Ethical Investing & Slow Money

Excerpted from:


A Financial Plan for the Truly Fed Up

By Published: August 3, 2012

SLOW MONEY One emerging wild card is the Slow Money movement, a cousin to the Slow Food approach to more sustainable edibles. It helps connect food producers of various sorts with nearby people who want to invest in them somehow. It’s a little like bond investing, a little like real estate investing and a little like the peer-to-peer approach.

“Let’s just take some of our money and invest it near where we live in things we understand, starting with food,” as the movement’s founder, Woody Tasch, puts it. He describes returns as being in the “lowish single digits,” ranging from roughly 3 percent to a few percentage points higher.

Jennifer Lazarus, a financial planner in Durham, N.C., and a Slow Money investor herself, said she realized that this wasn’t an attractive enough return for many people. She is meeting next week with a local accountant, farmer and lawyer to discuss ways to appeal to more investors. “There is a desire and absolutely a need,” she said.

Higher returns mean higher risk, however, and Mr. Tasch was quick to acknowledge the concentrated bet that Slow Money investors make in any given project. “Some people have opined that this is high-risk, low-return investing,” he said. “But the next question is, Risky compared to what?”

That’s the right question. Yet it’s utterly unanswerable. For people who find most for-profit companies repulsive or who can’t sleep because of fears about their stock market holdings, there is real mental health risk to investing in stocks.

But these alternatives are subject to large diversification and liquidity risks and don’t all have long-term track records.

“It is hard to be pure in this world,” said Mr. Wheat, the financial planner, who has helped many socially conscious investing clients. “People may not like buying gas for their car, but they usually end up doing that anyway. They may want to think about it in the same way, from an investment standpoint.”

At the least, ultra-alternative investors need to consider the possibility that a swing of just a percentage point in a portfolio’s average annual return can add up to hundreds of thousands of lost dollars over decades.

Perhaps that’s fine with you. But before you make a risky bet on a portfolio that looks anything like the one I laid out above, think about whether you’re prepared to save even more, spend less and work several years longer to make up for any shortfall in returns.

That may be the best way to figure out whether your principles are truly priceless.

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