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| Opportunities & Exposures: Investing |
A Separate Peace
Penny Knuff
10/01/2005
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Fueling this development is a new generation
of investors who take a more active role in determining where their money is
invested. Constructing a socially responsible separate account begins with one
important question: How do you want your money to represent you?
We have
recognized three important steps to answering that question:
• Prioritize.
Determine what specific issues are most important to you. A seasoned investment
manager will begin the process with a detailed questionnaire inquiring into your
individual preferences. Are you an avid environmentalist? Are you against
outsourcing domestic jobs? The key is to determine what you are passionate
about, and then prioritize those passions.
• Choose from a wide range of
investment options. It is important to pick an investment firm that gives you an
array of investment choices, including both domestic and international stocks.
Once you have identified your financial and social goals, your investment
manager will begin constructing a portfolio, determining asset allocation and
picking stocks and bonds. If you start with a very narrow universe of stocks to
choose from, you will narrow your post-screen choices, as well.
• Do
not sacrifice financial goals for social goals. The perception surrounding
socially responsible investing is that it sacrifices investment returns for
conscientiousness. This need not be the case with socially responsible separate
accounts. First Affirmative Financial Network, an independent investment
advisory firm, has found that the performance of socially responsible separate
accounts tracks closely with the performance of socially responsible mutual
funds, asset class to asset class. Since its inception in 1991, the Domini 400
mutual fund, for example, has a 9.76 percent average annual total return. The
S&P 500 generated 10.44 percent per year over the same period.
Our
midwife client recently identified another social priority, sustainable energy,
so she is reprioritizing her social goals as they relate to her financial goals.
With a new breed of screening tools and a skilled investment advisor, she can
easily create a portfolio to address her preferences. | Penny Knuff is senior vice president of Fiduciary Trust International of
California in San Mateo. |
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