Beach Lover’s Guide to Asset Allocation

Because every investor is unique, we take an individualized approach to each client. At the same time, we’ve learned that investors tend to arrange themselves in clumps along a risk spectrum ranging from ultra-cautious to super-aggressive. We have designed 5 model portfolios that correspond to these risk levels. (See Inside NI Portfolios to learn how we do this). These model portfolios are the starting point for our financial advisors to create customized portfolios for every client.

Each of our models utilizes Asset Allocation to assure that we provide a broad range of diversification, and therefore maximum safety at each level of risk tolerance. Asset Allocation is the practice of dividing investments among a variety of securities categories including various types of bonds and stocks. In general, higher risk portfolios will be weighted toward more investment in the volatile stock market, while lower risk portfolios are oriented more toward savings and bonds that do not fluctuate in value much if at all. Still, all portfolios include a healthy mix of assets to assure proper diversification.

This can sound a bit dry, so when we wrote Investing with Your Values we came up with a playful way to visualize the choices: The Beach Lover’s Guide to Asset Allocation.

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Community-building in the post-mall world

By Greg Garvan

Did you know…I just heard that it has been eight years since a new shopping mall was built in this country.  That sounds like great news to me, who would be happy about anything that discourages people from mindless shopping.  However, as you probably guessed, what has significantly increased, especially in the past 2 years, is our online buying.  Good news for investments in companies that transport, but more curious to me is: what does this mean for our sense of community?

Over the past sixty years, as we morphed from the city to the suburbs to the mall (which became the hot social spot for for early-morning walkers and after-school teens), and from the church and temple to the mall and now our screens, where will we find a sense of community if we are not even leaving our homes to do much of our shopping?  This sure seems like a wonderful opportunity for progressive meet-up groups to expand our circles, and invite more folks in.

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Gender Lens Investing

This article is highlighted as part of the 100th issue special, celebrating twenty-five years of quarterly newsletters. 

In recognition of the crucial role women play in sustainable development, social stability, and public health, Natural Investments and other socially responsible investors have focused on building gender equality through finance.

By Malaika Maphalala

MM nepal WEBThe Economist lays it on the line: “Forget China, India, and the internet—economic growth in the next decade will be driven by women.” Indeed, it’s already begun, with women’s incomes worldwide growing from $13 trillion in 2009 to $18 trillion by 2014.  That $5 trillion of growth is almost twice the growth in GDP expected from China and India combined during that period, making women the world’s biggest emerging market.  Even Goldman Sachs, while not my favorite authority, says, “investing in women is the single best way to reduce inequality and drive economic growth.”

Gender equality in economic structures will both promote economic growth and make the world a better place.  While the World Bank wants to “make women more competitive in financial markets,” it misses the vital point that financial markets need to be reframed to value the work that women are already doing.  Hence the importance of a new conversation emerging in the investment field: Gender Lens Investing.  Gender Lens Investing says that when we acknowledge the competitive advantage that gender inclusiveness brings to business, as well as the remarkable social and financial impacts connected to empowering women economically, we will make better investment decisions and ultimately transform our global economy.

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2013 SRI policy priorities

By Michael Kramer

(This article first appeared in the Spring 2013 edition of the Natural Investments News)

The start of President Obama second term offers a natural opportunity to assess the nation’s financial oversight policies from the perspective of investors who stress financial responsibility and sustainability as criteria for making sound investment decisions. The fragility and volatility of the global economy has shaken investor confidence for nearly five years now, since 2008 when excessive risk-taking and either poor or nonexistent regulatory oversight led to the collapse or near-collapse of many of our largest banks, investment firms, and insurance companies. In fact, according to the Chicago Booth/Kellogg Financial Trust Index, 79% of investors have no trust in the financial system, while 64% of Americans believe, according to The 2012 Ethics and Action Survey: Voices Carry, that corporate misconduct was a significant factor in bringing about the current economic crisis.

Four years ago, the apparent receptivity of the President’s transition team to these issues gave reason for hope among sustainable and responsible investors that systemic financial reforms would be put into place and that the business risks associated with climate change would become seen as material to the financial bottom line. Though financial institutions, and the power they wield over Congress, has delayed the implementation of important financial reform laws and regulations since 2009, let’s check on the progress to date:

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Millennials with a cause: SRI favored by over half

By Brady Quirk-Garvan

As a member of the Millennial generation, I was excited to see this recent article that confirmed what I’d long suspected: each succeeding generation is more committed to Socially Responsible Investing than the preceding one, with over half of Millennials saying they consider social responsibility as an important factor in their investment choices.

This shouldn’t be surprising news given that millennials seem to support a broader and more progressive agenda from environmental concerns to GLBT rights. As we talked about this article around the office it raised some very good questions:

First, even though people say that social responsibility matters to them, have they brought this priority to their investment advisors, and have the advisors taken action?  And second, as “Green” continues to become cooler and more mainstream, how much of the SRI world is about marketing and how much of it is based on impact?

At Natural Investment’s we take these two questions very seriously. We actively engage our clients in questions about what matters to them and then turn around and push companies to make progress on the issues that matter to you. We’re constantly looking for ways to deepen our positive impact in the world, whether through community investment notes, or investing in companies that are building community, not just profit.

I encourage you to read the article (here’s that link again). More importantly I challenge you to ask both yourself and your current investment advisor those two questions. Their responses may say quite a bit about how sustainable your investments truly are.

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High frequency trading boom is past?

By Greg Garvan

High Frequency Trading, HFT, is on the decline, even among the people who spent the past few years heralding its value. Bloomberg Business News reports that in 2009 more then 3.25 billion shares daily (!!!) were traded by HFT; in 2012 that dropped to half that amount, 1.6 billion shares daily. You might remember the “whoops, I slipped” market falls that happened in about 3 seconds and then rebounded a few times in the past few years. That was from HFT. However, what appears to be driving down its use is that the profits have gone out of the business (there has recently been quite an arms race as traders aimed to shave milliseconds off their systems’ response times).

What do we learn from this? I take away that technology and efficiency, in their drive to the razor’s edge of both, can become too efficient, and lose sight of the process while focusing too intently on a goal. This really is a story for our times, when we forget how we want to accomplish something, all in pursuit of just getting to the end.

(tip of the hat to Kevin O’Keefe and FAFN for pointing me to this new info!)

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SEC considers corporate political disclosure rules

Michael Kramer‘s column in February looked at the SEC’s ongoing process of considering new rules governing disclosure of corporate political contributions.  Read the whole thing at GreenBiz; here’s a teaser:

Corporate spending on political contributions and lobbying can create reputational risks — especially when S&P 500 companies spent more than $1 billion on these activities for 2010. Such risks can be managed effectively if companies examine whether their memberships in trade associations that are engaged in lobbying activities accurately represent their corporate interests and policy positions. Shareholders in turn need to understand their companies’ spending for trade association lobbying and the risks they might present. And now, the Securities and Exchange Commission is considering a rule to require public companies to disclose their spending on politics and lobbying.

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British housecat beats pros in 2012 stock picking

In a very different take on “natural” investing, a housecat in England has won a year-long portfolio challenge, beating out teams of three professional investment managers and business school students.  Orlando had a fantastic 4th quarter, surging past the professional team on the basis of his finely honed technique of tossing his favorite toy mouse onto a grid of companies he could invest in.

The stock management challenge was organized by The Observer, which reported on the results in January.  Orlando managed to end the year up by over 10% from his starting stake of five thousand pounds, while the pros gained about 3%, and the students lost about 3% on the year—though the students hold bragging rights for the final quarter, during which they beat even the surging Orlando.

The Observer notes that 

The result indicates that the “random walk hypothesis”, popularised in economist Burton Malkiel’s book A Random Walk Down Wall Street, is perhaps truer than we thought. Burkiel’s book explores the idea that share prices move completely at random, making stock markets entirely unpredictable.

We wouldn’t go that far, but neither will we be turning to Orlando for advice: the Observer notes he is unavailable for consultation because of a claws in his contract.

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Financial transaction tax needed to reduce volatility, increase investor confidence

Michael Kramer’s most recent Sustainable Investor column on addresses the continuing risks to the financial system that are introduced by computerized high-frequency trading, which accumulates profits by buying and selling stocks multiple times per second. You may recall the “flash crash” of 2010, when computers drove a quick 1000-point drop in the Dow Jones average. Kramer notes, “the problem with this approach is that a company’s fundamental financial value is completely overlooked by this type of investor.”

An existing transaction tax of .00257% raises about $1 billion per year to fund the SEC; other major economies, including the UK, Hong Kong, Switzerland, and India also impose FTTs on at least some asset classes.  Kramer makes the case for raising the FTT enough to discourage some of most egregious high-frequency trading. The simple truth is that investors need to trust the markets if they’re going to invest in them again. As long as people are afraid that the system has run amok, can’t moderate volatility, and is not accountable for severe losses or unethical practices, they will take their capital elsewhere, which one could argue is precisely why the economic remains stagnant.

See the full column on

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