Successful Socially Responsible Investing – Why the Right Advisor Helps

There is an old wisdom-saying sailors have been using for centuries, relating to the sun’s rising and setting.  It goes something like this: Red in the morning, sailors take warning - red at night, sailors’ delight.  Ocean-going sailors have always been concerned about forecasting the weather, for obvious reasons.  Their lives are dependent upon it.  Investors have always been concerned about forecasting the economy for similar reasons.  Their financial lives are dependent upon it.  Socially responsible investors have a more nuanced reason.  They know their financial lives are ultimately dependent on a sustainable economy.  

This forecasting is a difficult task.  Not only is the future of the economy always uncertain, the way the investment markets will react to future economic events is also uncertain.  Markets always reflect the behavior of human beings, and human beings can act rationally at times and very irrationally at other times.  At the same time, investment professionals always counsel their clients, “Past performance is no guarantee of future results.”  So neither the known past nor an unknown future can reliably tell investors how they should invest.

Competent financial advisors help investors navigate.  First, successful investors invest in solid, successful companies and in fiscally sound governments.  Advisors are trained to evaluate the strengths and weaknesses of companies and governments, and they generally do this better than amateur investors.  Financial advisors specializing in socially responsible investing offer an added benefit.  We help our clients invest in successful companies that are also more likely to contribute to a more sustainable future economy. 

Second, although the future is surely uncertain, financial advisors are generally more attuned to economic trends that affect their clients’ investments.  For example, economic recessions usually happen cyclically every four to five years, so it is appropriate to be asking now whether there is a recession on the immediate horizon.  The current Chicago Fed National Activity Index and the Conference Board’s Leading Economic Index tell me, probably not.  This is corroborated by a very healthy and upward trending stock market, a normal Treasury yield curve, oil prices that are not skyrocketing, and a downward trending credit yield spread.  In short, I am not very worried about a recession in the near term, and my investment advice is more seasoned by this informed outlook.

Finally, and perhaps most importantly, competent financial advisors know that having a coherent and disciplined investment plan, constructing a portfolio that appropriately matches that plan, and adhering to that plan consistently over time, is much more important than picking all the right individual stocks or forecasting an uncertain future.  Even better, advisors specializing in socially responsible investing help their clients design and maintain investment plans the assets of which contribute to healthier communities and a more vibrant planet.