Investing as a Socialist: Ethical Wealth Management
Many socialists may balk when it comes to investing. This comes from the perception of the stock market being the vehicle for building wealth while supporting the practices of unethical corporations. But what if investing can be leveraged as a way to gain control over your labor while fighting the socialist good fight against big business?
It is possible to build a portfolio that is thoughtful, equitable, and prosperous. By making conscientious investment decisions, you can create a life you are content with, while making the world around you a better place.
As socialists, we don’t need to sacrifice our own financial health in order to understand that the growing wealth inequality in our country is morally reprehensible. Let’s take a look at Socially Responsible Investing (SRI) and how you can plan for your future and the future of the planet through smarter wealth management.
Building Wealth
I know, nothing sounds more anti-socialist than the idea of building wealth, but it is possible to ethically and responsibly store your wealth for emergencies, retirement, etc. There is no way of knowing how long you’ll live, and working late into life isn’t appealing to even the most ardent socialist. Building wealth during your labor’s most profitable years can help ensure financial independence later in life.
“Why not just put my money in a savings account?” One word – inflation. Even in an ideal situation, inflation can be expected to eat into the value of your savings by 2%, yearly. However, we are not in an ideal situation. As of writing, the inflation rate has hit 8.5%. The exceptionally small amount of interest you make on a savings account simply can’t keep up with this level of value loss. Investing your money is a smart way to try to increase your wealth’s value at a rate that can outpace inflation.
But investing in the stock market doesn’t mean you need to support exploitative companies. Socially motivated investors can choose to invest in businesses that meet their personal criteria: including sustainability, ethical labor practices, philanthropy, and other progressive ideals.
Doing the leg work researching companies to determine if they are both ethical and a sound investment can be time consuming. Mutual funds focusing on socially responsible investors do exist, but it is important to understand the fund’s goals and fees, as well as their criteria for choosing the companies in its portfolio.
Ultimately, regardless of where you invest, the important thing is how the personal wealth you create is used. When you have more than you need to feel comfortable, begin to give back through donations of your money or your time towards creating a more equitable world. You can also plan a charitable trust that will continue to generate social equity long after you pass.
Generating Passive Income
Investing your savings is also an effective way to increase your passive income. As we’ve discussed elsewhere on this site, generating passive monthly income is a fantastic way to take control of your labor or enjoy more free time to pursue other passions.
One way that investors are earning passive income is through dividend investing. These investors focus on stocks and funds that pay large dividends: sometimes as high as 12% or more. These earned dividends can be reinvested to benefit from the power of compounding interest. Or they can be withdrawn from your investment account to act as supplemental income or to free you from the need to work full time.
As with growth investing, it is important to understand where your money is going and the effects it ultimately supports. If you are investing in an individual stock, what are the company’s values and do they practice these values in their everyday operations? If you are putting your money into a fund, the same holds true for the companies in its portfolio.
Investing with Conscience
In a capitalist country such as ours, the money you spend is your vote for the kind of society you want to see. This is also true of the money you invest. Choosing to put your money in the stock of a company you believe in is a powerful influence on the country you want to see.
Don’t let others tell you where to invest your money. You may have differing social agendas that you value more than others. You might also have a varying tolerance for risk as well. Your investment may be a way to reward ethical companies, but it is also your life savings.
If a key tenet of socialism is the collective ownership of production, then under the current capitalist system, the stock market offers an opportunity to buy a piece of a collectively owned company working to improve the world we share.