Financial products that aid the poor and beat the market
Investors find a more profitable place to stash cash than banks. Bonus: It's also socially responsible.
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In this climate of low interest rates, financial advisers are finding that many of the best options are those that directly benefit the public good. Mr. Wheat recommends some buy into emerging market bond funds, which finance public projects abroad and help diversify a portfolio. Stuart Speer, a financial planner with Heritage Advisors in Overland Park, Kan., touts general obligation municipal bonds – which pay for roads, bridges, and other public goods – as nonrisky instruments with yields in the range of 4 percent and potential to climb in value.Skip to next paragraph
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In Louisville, Ky., financial planner Andy Loving has found that enabling clients to support meaningful causes is sometimes also the best way for them to achieve short-term financial goals. Last summer, for example, a grandmother asked him where she could safely park her grandson’s 2010-11 college tuition ($8,000) for one year. He recommended a one-year Calvert Foundation community investment note, which paid 3 percent and gave her options to steer funds toward environmental, antipoverty, or regional initiatives of nongovernmental organizations.
“Over the course of the last six months to a year, I’ve put about maybe $400,000 of clients’ money into those [Calvert Foundation] notes because they were the best deal around for short-term money,” said Mr. Loving, president of Just Money Advisors in Louisville.
In banking, consumers are finding some of the best rates are available from mission-driven community banks. Chicago-based ShoreBank, which helps at-risk homeowners secure fixed-rate mortgages, has seen assets in its online savings account program swell from $30 million in December 2008 to $265 million a year later.
Last month, the account was paying 1.95 percent, or 35 basis points more than the top online savings rate listed at bankrate.com.
Seeking top returns through socially responsible vehicles can sometimes mean overcoming obstacles and inconveniences. To buy a Calvert Foundation community investment note through a brokerage account and have it appear on a brokerage statement, one needs to invest at least $1,000. Wheat said individual investors sometimes buy these notes by calling the bond desk at a major brokerage, but the process may “require a little hand-holding” since investors need to learn a protocol.
“It’s not hard,” Wheat said. “But it’s not like buying a mutual fund. You can’t just do it online by choosing from a drop-down menu or typing in a ticker symbol.”
Still, many are finding the leap to higher returns to be quite easy. Howard Goldberg, a Chicago sales representative for information-technology products, had never used socially responsible investment products. But market-topping rates, coupled with the idea of helping neighbors in a foreclosure crisis, convinced him to move a large portion of his funds to ShoreBank last year.
“You think you can always get the best returns from the biggest banks, and that’s the only place to put your money,” Mr. Goldberg says. “But there are alternatives out there that are just as good, in terms of investing money. And in this case, [the alternative] was even better.”
In most years, a 3 percent return would seem paltry. But with interest rates at rock-bottom levels, gaining 3-6 percent on an investment represents a strong showing. And it can be done while financing a host of social goods. Interested in these products? Already investing? Let us know on Twitter.