Investing Green: a Guide for New Buyers

Fri, Sep 17, 2010

Green Business

How can you make the color of your portfolio match the color of your cash? Chances are, if your small business has weathered the storm of its first few years in action and has unstuck itself from the mire of unprofitable operation, you’re taking good care of all of the money that comes in as profit. But here’s a fact that may surprise you: the most profitable thing to do right now with that money may be to invest it. And the best place to invest right now is in the new green economy.

You may be wary of the idea of investing any money right now, considering the fragile state of America’s economy but we’ve got some tips that aim to help you ride the green wave all the way to Money Island.

Tip 1: Approach your brokerage firm about switching a portion of your portfolio to green.

Any good investor knows one simple fact: diversity is important. Make sure you do not allow all of your risk to lie in one industry or niche, or you’re vulnerable to huge losses. Be sure that you only allocate the percentage of your portfolio that you are comfortable with.

That said, once you decide how much you’re comfortable investing, be sure to go to your financial adviser and seek advice on what’s profitable in the green sector, depending on what your investment goals are. Most people don’t realize that even the larger firms like Goldman Sachs and Merrill Lynch offer green investment options. If you’re looking for a more frugal option seek a local financial adviser and see what they can do for you. Perhaps you’re looking to take the reigns of your investable funds by yourself? Try using an online broker like eTrade as opposed to a brick and mortar brokerage house, you’ll save a lot of money on transaction fees and broker commissions.

Tip 2: Seek out tips for good investments from other sources.

If you’re investing with a larger firm, your investment will probably be put into a fund-for example, a solar power fund-but if you look around by yourself you may find an opportunity to invest in an individual company that is going places as well. Websites like GreenMoneyJournal and TreeHugger have articles and forums that offer good suggestions, as well as the New York Times Green, inc. blog.

Here’s another suggestion: listen to what the politicians are saying. If you compare the Google Trends search results for “clean coal” to the trading price of the biggest US coal producer, Peabody International, you’ll find that the price of the stock rallied at the time when it was being most searched for, in late 2008. Now the rush has subsided national politicians have stopped talking about the idea. There is a lesson to be learned: if you preempt the politicians with a little bit of research, you can certainly achieve a high ROI when the rest of the public catches on. It pays to educate yourself.

Tip 3: Act local.

In the midst of what many are calling the greatest financial meltdown since the Great Depression, it is seemingly a very wise decision to keep your money as secure as possible, but as the old saying goes, “necessity is the mother of invention”. Use your own ingenuity to synthesize your goals on a local level. Think it’s impossible? Try this: if you own a shop or small store, lobby your municipal politicians for a shuttle system to carry people from different residential points in town to the business districts. This would save an incredible amount of fuel since people would have less need for their cars, and you would have an influx of new business. Think of a new improvement to your town and you’ll have more clients to thank for it.

Tip 4: Philanthropize.

Not only do the big businesses in any neighborhood set a tough precedent for pricing and convenience, they also set a very high standard for philanthropy. Although many consumers are totally unaware, most local franchises and big businesses donate tens of thousands of dollars every year to local causes. But one can almost guarantee that this money will be the first to go in the tough economic climate. What can you do? Fill the void in your community a little bit; if you foster a positive society the other choices come naturally. Find local not-for-profits, green or otherwise and donate money or time or product to them. Not willing to take a total loss? Get the local press involved. Big business isn’t afraid of showing off its generosity-why should you be? If you want to go beyond local, invest in global entrepreneurship. Kiva offers an incredible resource for people to offer microloans to entrepreneurs halfway across the world. And here’s the great news: Their repayment rate is 98.5 percent. Talk about a low-risk investment!

This guide is meant to start you down the green investment path. Of course, there are always plenty of other things to learn, so keep reading up and put your money where your heart is.

By Thomas Sabino-Benowitz.

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