By Jason Silverberg, CLU

Many of us have a good understanding of the typical asset classes that we can invest in: there’s large, mid, and small company stock, international companies, domestic bonds, and even international bonds, just to name a few. But over the past couple of years some new ways to diversify your portfolio have been launched onto the investment scene. These investment styles, if suitable for your specific situation, may provide options to help personalize your portfolio to your beliefs and values.

Socially Responsible Investing

What is it? Well, being a socially conscious investor means that you are investing in companies based on their environmental, social, or political standing in society. For hypothetical example for illustrative purposes, a socially conscious investor may not want to invest in a company if it pollutes the environment as a result of manufacturing its product. In other words, this style can be viewed as punishing those that don’t meet the criteria as opposed to rewarding those who do.

When looking at why people are attracted to this type of investing, it provides people an opportunity to invest in companies that may follow investors’ values. It also makes the investor feel good that they are doing their part to help society. Investors, if given the choice, probably wouldn’t want their money being put to use for business practices that differ from the investor’s values. At the same time anytime you restrict investment options an investor must be willing to live with the fact that they may underperform similar investing strategies that do not exclude certain investments.

Green Investing

Many people confuse Socially Responsible investing and Green investing. In contrast to Socially Responsible investing, Green investing does not “exclude” companies for what they don’t do but rather invest in companies for what they do (in this case produce alternative or renewable energy and green technology). A general classification for this style of investing is called sector investing, which invests solely in one area or industry.

There may be advantages to investing a portion of your portfolio in Green Funds both for socially responsible reasons as well as investment reasons. For a hypothetical example for illustrative purposes only, we all can agree that an alternative way to power our cars and our homes is desperately needed. Whether it’s solar, wind, or even water power, alternative fuel sources are needed in the future. Additionally, one of President Obama’s major initiatives is to improve our alternative energy options, so from an investment prospective we know there will be a lot of government dollars going into this industry in the future. The main disadvantage is that much of this technology is experimental and research makes up a lot of the process. Investing in these companies presents far greater risks. Investments that focus in one sector, may involve a greater degree of risk and volatility than an investment with greater diversification. As an investor you must therefore be careful and with any sector fund, one must never put all their eggs into one basket.

Vice Investing

Are you a sinner? Do like to gamble, drink, or smoke? Even if you don’t, investing with this style may still be for you. Investing in companies that deal in vices is a way to invest in casinos, alcohol and tobacco manufacturers, and weapons and defense contractors. Similar to Green investing, Vice investing is a sector style investment strategy, but specifically chooses companies that fit the sector of sin.

The obvious drawback to using this kind of investment strategy is the moral and social implications of buying ownership shares in companies that are typically not thought very highly of in society. But, some people really like these investments because it adds a little personality to an otherwise boring mix of companies. Again, be careful not to overload on these kinds of investments. As mentioned above investments that focus in one sector may involve a greater degree of risk and volatility than an investment with greater diversification.

Whether you’re a sinner or a saint, an oil guzzler or a conservationist, there are many ways to combine traditional investing with personal views and attitudes. Talk to your financial advisor about investments that may hit home for you. At the same time, don’t get carried away. Your investments should fit into a carefully crafted investment strategy based on your risk tolerance and time horizon.

Remember that investments will fluctuate and when redeemed may be worth more or less than when originally invested.

For more information, please contact Jason Silverberg directly at Jason@finadvinc.com. Jason is a Registered Representative and Investment Advisor Representative of Securian Financial Services, Inc., Securities Dealer, Member FINRA/SIPC.