The Importance of Investing

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Illustration courtesy Dave Channon
Investing is the best strategy for retirement.

The Importance of Investing

Why should you invest? After all, isn’t it safer to buy certificates of deposit (CDs) or bonds, or just stash cash under a mattress? The short answer is that by investing, you stand a better chance of making money over the long term.

For example, CD rates currently are hovering around 3 percent, depending on how much cash you have and how long you’re willing to sock it away. (Visit for a rundown of current rates for CDs.) With rising inflation rates (the 2004 average was 2.68 percent), at best you’re only doing a little better than breaking even, and at worst, you’re actually losing money. That’s because even though you have interest income, those earnings are barely keeping pace with the cost of living, let alone going beyond it. Money stashed under the mattress does even worse because it pays no interest.

Investing is viable for just about any lifestyle. For example, if you save just $20 a week and put it in conservative, low-risk investments that earn an average of 8 percent (a return rate average investors generally can expect), you’ll have a considerable amount of money when you retire. After 20 years, that $20 a week will have grown to about $36,900. Over 30 years, your nest egg would more than double to nearly $76,000.epending on how that money is invested — such as through your employer’s 401(k) program — you could save on taxes, too, freeing up more money to invest. With online investment calculators, such as this one from Van Kampen, you can plug in different amounts and timelines for different goals. But regardless of the level of financial security you want when you retire, don’t look at investing as something you can’t afford to do. Instead, it’s something that you can’t afford not to do.

Community Investing

When is an investment considered successful? The traditional yardstick is that not only do you still have the amount originally invested, but you also have money coming in, in the form of dividends or, if you sell an investment that went up in value, as a profit.

But success also can be measured in terms of whether the investment has helped make the world a better place. That’s the logic behind “community investing,” where money flows to grass-roots projects. One example is the Northern California Community Loan Fund, which has provided working capital for youth theaters, halfway houses and other organizations that usually can’t access traditional lending opportunities.

Community investing is increasingly popular — growing 84 percent between 2001 and 2003, according to the nonprofit Social Investment Forum. Like other forms of socially responsible investing, community investments require some homework to make sure that your money ends up where you want it.

One well-known source of community investments is the Calvert Foundation. “They’ve created a note that works like a CD, so you can put in $1,000 and up — you don’t have to be well-heeled — and choose your rate of interest and term,” says Hal Brill, president of Natural Investment Services. “They have a pool of community investments, and you can designate whether you want to invest internationally or in a particular region of the United States. For larger amounts, they’ll work with you to customize a portfolio of community investments.”

Green Investing Resources

Calvert Social Investment Foundation
Specializes in community investing.

Global Warming & Your Mutual Fund
Helps assess the potential risks of global warming to the value of numerous mutual funds.

Green Money Journal
Quarterly newsletter that tracks SRI.

Investor Words
Glossary of investment terms.

The Motley Fool
Dedicated to educating, enriching and amusing individual investors.

Natural Capital Institute
Researches principles and business practices that lead to social justice and environmental restoration. NCI is an offshoot of the work of Paul Hawken, author of The Ecology of Commerce.

Responsible Shopper
Learn the good, the bad and the ugly about companies on a range of issues.

Social Investment Forum
Has an overview of SRI and links to other resources. The “SRI Mutual Funds” link provides detailed information about more than 100 funds, including their screening criteria, financial performance and account minimums.

SRI World Group 
SRI and community investing news, and a free SRI mutual funds guide.