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How to build a rock-solid ethical portfolio in uncertain times

Think cash, CDs, and government bonds, for a start.

October 20, 2008

'I recommend cash or cashlike vehicles as the most rock-solid thing for people to have their money in right now.' – Doug Wheat, High Ridge Financial Planning

carrie timberlake/high ridge financial planning

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Volatile markets can cause even the most bullish investors to pull in their horns. So these days investment professionals who help individuals build ethical portfolios are crafting safe harbors in the storm. Recently, the Monitor's Laurent Belsie discussed this subject with Eric Packer of Progressive Asset Management, a socially responsible investment broker, in Wellesley Hills, Mass., and Doug Wheat of High Ridge Financial Planning, a fee-only advisory firm in Northampton, Mass. (The views expressed here are for informational purposes and do not represent an endorsement by The Christian Science Monitor.) Eric, what's the most conservative social investment you're recommending now?

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Mr. Packer: The one that we have is actually something that most people are familiar with, which is a CD – a certificate of deposit.

Sounds pretty rock-solid.

Packer: Pretty rock-solid, FDIC-insured, and we offer one which is unique, where you have the combination of the security of a CD but the return is based on a percentage of a clean-energy index. So if you hold that CD generally for a five-year period, you know that all of your principal will be returned to you. Yet part of the money is going into a portfolio of clean-energy investments, so you're getting the chance to potentially grow the assets.

What are you recommending, Doug?

Mr. Wheat: I recommend cash or cashlike vehicles as the most rock-solid thing for people to have their money in right now. ShoreBank, you may be familiar with, is a socially responsible bank and they now have a high-yield online savings account, which has a 3.5 percent yield and is comparable to what you can get at any large bank like ING Direct or HSBC. With the difference being that the money that ShoreBank gets goes to affordable housing and other social projects.

Are your clients more worried than usual?

Packer: People are hearing the news about the mortgage meltdown, credit crunch, energy prices. So there's certainly an interest of people saying: How can I preserve part of the principal that I have?

Wheat: Like Eric's, clients are hesitant to open up their statements. They don't want to know what is happening and, in a sense, have a blinder on to the market. In part, that's good.... Not opening your statements prevents the knee-jerk reaction that maybe some people might have. But in general, I tell all my clients that it is important to maintain a good asset allocation, both today when the times aren't as good as well as when the markets are doing really well – and that we need to try and keep their costs low and we need to rebalance their portfolio on a regular basis to make sure that we're buying low and selling high instead of selling when things are down.

In uncertain times, do less of your assets go to stocks?