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Social Investing

Social Investing: Trend or True Investment Philosophy, Investors Speak Out

The investment atmosphere is always being monitored by people who may want to increase the value of their assets. Because of such intuition, there is always an intention to look for the best opportunities which will provide optimum generation of profits. In considering the current local trends, it seems that Social Investing is attracting more and more local investors to delegate their resources.

Social Investing works in a way in which an investor votes his shares in a shareholder dummy which argues about a social question (Hanson, 1996). Today, the procedure only includes two types of techniques. The first strategy is not to invest in companies which are defined to belong in the group of ‘outlaws’. The other procedure is to invest in businesses which provide exemplary acts or responsible in terms of social justification and responsibility. In one aspect, although investing is a form or profit generation schemes, some consider Social Investing to be more inclined to tackle a responsible obligation for the society (Serota, 1995).

The activities involved in Social Investing are primarily concentrated on the factor of voting for or against a particular company depending on the shareholder proposal being

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initiated. At a particular time of the year, an enormous number of social related proxy questions are distributed to corporations by different sectors of the society, be it ordinary people, prominent individuals or institutions. In most aspects, the questions are designed to follow the values being promoted by the different segments of the church while others are formulated according to the consensus of the larger groups of the population.

As mentioned, the second approach of social investing strategy is to clean up one’s portfolio of investments by staying away from those considered to be in direct contrast of a ‘socially’ sound thinking. This includes the decision to stay away from companies which are deemed to be socially unhelpful in structuring a better way for people to live. This type of negative screening aims to limit or exclude investment allocations to companies playing host to tobacco or alcohol producers, military facility contractors and other related pre-determined groups of non structural social segment businesses.

So what is in store for an investor when it comes to social investments? Technically, there are quite a number of justifications in having a social investment strategy. To sum it all up, it is wise to look for the general idea why investors tend to select or exclude companies for their investment platforms. Since in any investment strategies, the main course of action is to increase profitability, looking at how social investing performance can be a good opportunity to understand its function.

For example, investors who may want to increase their shares in those ‘socially sound’ companies have the kind of hope that in the long run, their investments will generate profits since the whole community are inclined mostly to have the best and ideal forms of lifestyle. This may include good labor sectors, stable house prices and sufficient and cheap health and food products. In that case, investors allocate their funds to companies which promote these standards in light of forecasting a sustainable and growing market atmosphere.

Meanwhile, those identified to be ‘outlaws’ are projected to be sectors exposed to greater vulnerabilities due to the fact that these companies do not necessarily follow the social principle of promoting better standards of living. Social investing tends to limit the forecasted capacity of these companies to earn because of the idea that not much of the society will support products and services which are not really that constructive to human building of societies.

In order to expand some more insights about social investing, an interview with two investors may be of great help. The first person who has given a comment about social investing is a 49 year old male who runs a convenient store in an urban area. The individual invested in a prime share for a realty company. He considers his decision to be that of a reflection of the ‘baby-boomers’ generation philosophy in which the basic commodities of lifestyles were given much importance, homes are given priority.

He mentioned that he stayed away from negative companies because he knows for the fact that at some point in time, people will realize that the products of these companies are doing more harm to the well-being of the people. He noted also that he is a moral person and he can’t just simply grow his money capitalizing on supposedly bad products for the people.

On another scope, a younger investor at 29 said he invested in an alcoholic beverage company. This strategy came about when he realized that beer consumption will never run out dry because people tend to consume more alcoholic drinks than ever before and considering that younger generations are more willing to have a hip and cool lifestyle. The person said that if he will be investing in the beer company, he will actually earn more compared to the seemingly stagnant social company sectors such as health care companies which are currently on the verge of devastation due to poor finance strategies. Apparently, many ethically inclined investors stay away from inconvincible ads (MacDonald, 2004) but this investor would like to take advantage of them.

To sum it up, social investing is a technique in which one tends to select a company which he deems to perform well according to how social justifications are perceived. It is always a matter of selecting the company which promote socially responsible marketing and exclude those businesses which promote products otherwise. In any case, the procedure will always depend on how an investor would like to allocate his assets to increase his earning potential.

References

Hanson, K. 1996. What is Social Investing? – The Stanford Experience. The Thinker. Retrieved February 26, 2008 from http://www.stanford.edu/group/Thinker/v2/v2n1/Hanson.html.

MacDonald, J. 2004. Has Social Investing Lost its Way? The Christian Science monitor. Retrieved February 26, 2008 from http://www.csmonitor.com/2004/1115/p13s01-wmgn.html.

Serota, S. 1996. The Social Investing Quandary. ERISA Fiduciary Law. Retrieved February 26, 2008 from http://books.google.com/books?id=_PSywJUQllsC&printsec=frontcover

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