Many existing socially responsible investing (SRI) funds consider equal opportunity and diversity metrics in their stock selection. There does not appear to be a mutual fund that places racial harmony as its primary focus. Certainly, a low fee investment option might be of interest to investors wanting their portfolios to hold companies that are deemed best-in-class in this regard. Also, some may want to specifically avoid companies that have been identified as having problematic practices or business models according to their worldview.
One of the early successes of SRI was the divestment campaign utilized by institutional investors to address apartheid in South Africa. An individual or organization can also use SRI to execute a disinvestment campaign.
As other portfolio pages on this site illustrate, a low fee SRI portfolio has the following elements: at least one or two data sources for use as a positive (inclusive) screen; one or more negative (exclusive) screens; and a financial stability control. There do not appear to be many sources of generally recognized authorities on ranking publicly held companies on attributes related to racial harmony. Reader feedback and suggestions are welcome. The proposed investment criteria, like racial harmony, should be considered as a work in progress. Waiting for the perfect set of screening criteria to be available, however, is not helpful if progress is to be made.
Although an ideal data set may never exist to identify companies that contribute the most to racial harmony, there are certainly companies that are to be avoided. For instance, several authors make a strong case that for-profit prisons are an obstacle to racial justice and harmony. The following books are recommended sources in exploring this issue further: Michelle Alexander: The New Jim Crow, Mass Incarceration in the Age of Colorblindness; Tara Herivel and Paul Wright: Prison Profiteers, Who Makes Money from Mass Incarceration; Curtis R. Blakely: America's Prisons, The Movement Toward Profit and Privatization; Joel Dyer: The Perpetual Prisoner Machine, How America Profits from Crime.
Note that one of the primary motivations in developing this portfolio strategy is to provide investors with an alternative to the typical broad-based index funds that, by design, include investment in for-profit prisons. Of course, other portfolio themes can accomplish this objective as well, and may be helpful in providing further diversification.
Another objective is to present positive screening ideas favoring investment in corporations with best-in-class behavior in the area of racial harmony. A combination of positive and negative (i.e. avoid) investment criteria is therefore provided, while still maintaining adherence to good investment practices such as diversification, attention to company financial stability and low investment fees. A suggested inclusive screen is to utilize the most recent FORTUNE Magazine Top 100 Best Companies to Work for listing.
US-listed stocks that are already included on a major social responsibility index.
Company identified in the most recent FORTUNE Magazine Top 100 Best Companies to Work for listing. A minimal % minority hiring value (e.g. 15%, 20%) may be helpful.
Rank companies in descending order using a financial stability metric (e.g. Morningstar® rating, S&P credit rating).
Include a minimum of stock holdings to provide diversification. If a smaller number (e.g. 15) is used, it may be appropriate to consider investment in additional themes as well.
An equally-weighted allocation may be a convenient starting point.
Exclude for-profit prisons.
Low Fee Implementation Options
Do-it-yourself (DIY) or DIY with some advisor assistance
Depending upon an investor's worldview, experience and access to portfolio evaluation tools, one option would be to use the suggested investment criteria to construct and test a portfolio of holdings that result from criteria identified. Portfolio back-testing can be helpful in identifying the historical performance characteristics and volatility. Investment platforms such as Folio Investing and Motif Investing have fee structures that make it practical to build a portfolio of individual stocks, and invest in fractional shares as needed, for a relatively low fee. Discount brokerage platforms which require whole-number share purchases and have trading costs based on the number of stocks in the portfolio may require that a large investment be made to keep the investment cost in alignment with a low fee philosophy. Advisors using the build-your-own tool available from Motif Investing may be able to provide convenient access to an established portfolio inspired by the construction process identified.
This information is not intended to provide specific investment, tax or legal advice. You should consult appropriate professional help for your investing decisions. Tom Nowak may own securities that may or may not be identified using the screening tools noted.
Any references to investment performance are historical in nature. Past performance does not guarantee future results, and all investments entail risk of loss, including the potential for loss of principal. Each investor is unique: factors including his or her investment experience, tax situation, time horizon, tolerance for risk and fluctuations in value should be weighed carefully before making an investment decision.
The views expressed are solely those of the site sponsor and do not necessarily represent the views of any organization that the author is associated with. Neither Quantum Financial Planning LLC nor Tom Nowak receives any fees for mention of any source of information or service provider.
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