Socially Responsible Investing is another way of investing money

Socially responsible investing ...sounds like an oxymoron right?

In today's world of financial engineering, investors are described in many ways, but very few include the word "responsible".

This type of investing goes beyond technical and fundamental investment techniques, and looks at the way a business behaves.

Some call it an investing strategy, but it really is more of a technique for choosing between different types of investments.

What is socially responsible investing

Socially responsible investing (abbreviated as SRI) is a method for selecting investments that tries to balance financial return with "social good".

Social good includes things like:

Actually, SRI has been around for a while...more than 100 years. It was used by religious investors who wanted to steer clear of companies involved in tobacco, alcohol, and gambling.

Why practice SRI?

People practice this type of investing to advocate for human rights, the environment, religious views, or good corporate governance.

It can make an investor feel that the profits they earn aren't at the expense of other people, the environment, etc.

Factors affecting SRI

Choosing to practice SRI requires more effort on the part of the investor. You need to spend more time researching a companies business practices in order to figure out what they're doing and how they're doing it.

Moreover, the way you define social good can have a huge impact on the availability of investments.

For example, an investor may choose to avoid tobacco companies because of tobacco's affects on human health. This investor would need to avoid companies such as Altria.

Up until 2007, Altria also owned Kraft Foods. So Kraft Foods would not make the cut for someone defining social good in a very strict sense, even though it isn't directly involved in the production of tobacco products.

Alternatively, you can choose to let the professionals due the searching for you. According to the US Safe Investing Forum, in 2012 there were 333 U.S. mutual funds that consider environmental, social, and/or corporate governance criteria. And don't forget about ETFs (exchange traded funds).

Is SRI Right for You?

Investing in socially responsible companies is a personal choice.

Remember that SRI is just way of choosing between different types of investments. Approach it the same way as you would all the different ways of investing money.

Remember: Just because an investment is "socially responsible" doesn't mean it will give you a good return.