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Are there alternative ways to invest savings?
What are some ways to grow your savings without investing it into the stock market/401k?
In short, I don't want my savings to fund giant corporations. It seems like most mutual funds can't exist without a portfolio of such corporations despite calling themselves green or ethical.
I've been storing funds in CDs or HYSEs but wondering if there are any other avenues.
I like the spirit of the question, and I hope there are some interesting ideas to be found - I really like @teaearlgraycold’s thinking, and I’m pretty sure there are peer-to-peer lending and/or micro finance platforms that’d allow something similar with a bit less personal attachment and management overhead, if you’re comfortable with the risk.
That said, it’s also worth remembering that CDs and savings accounts are still pretty much just putting money into a fungible pool for organisations who are likely to use that money less ethically than even an imperfect ethical fund.
Not that I’m trying to critique - kinda the opposite, I’m saying to pick your battles - it’s just that I personally would say that worrying about the Nth order impact of an S&P 500 tracker for a non-billionaire amount of wealth just doesn’t make the cut of being worth the mental overhead. If there’s an actively positive way you can invest, I think that’s worthwhile, but if there isn’t I’d say any commercial financial product (up to and including a basic current account) carries a similar moral burden to your average Vanguard ETF, so you’re better picking whichever makes the best return you can and using the money/energy/general wellbeing that brings you to do good in the world.
[Edit] Typo
Throwing a comment in here for using Credit Unions. They are not-for-profit and supporting them is supporting your community banking. So if you are going to do a CD to save some money, bring it to them. I've been in the credit union space for 10 years and it's such a great community.
Credit unions are fantastic. And they are just as safe as big banks, since they have the same FDIC insurance (for credit unions it's called NUCA but it's basically the same thing).
Thanks for commenting. The point wasn't about being safe, it was about bringing your money to a place with better morals. That was the main reason for posting. Also the organization is NCUA.
Good points.
I do try to minimize the amount of funds in a big bank HYSE and more towards a mutual bank CDs that are supporting local businessees. But its also risky to store all my savings in a local bank.
Alternatives that are on par with stock market growth may not really exist under capitalsm - but i really wish there is something somewhat comparable.
I mean....you're asking for capitalistic gains without a capitalist outcome.
"I want someone to pay me for storing my money" is....well..certainly the essence of the lending industry.
You do that because you don't want your money to be worth less due to inflation, and to sit there in a vault being unavailable is worse for most everyone (less money in circulation ='s less opportunities/jobs/start up loans and the like).
Further, inflation doesn't care what your economic model is, it's a function of production and availability.
Finally, your investment provider needs to honor their returns. That means investing in reliable things with a proven track record.
To be more ethical you could source startups/companies you'd like to invest in directly, or just buy stocks of companies you find ethical yourself. Basically build your own fund.
The issue here is that you're now day trading in a high risk sector... with all the added tax overhead you now get to enjoy and likely none of the benefit.
Edit-
Or to maybe summarize quicker, all returns are because you're becoming a lender and just have a middle-man lending the money for you.
Yes... I don't want to play this game but I also don't want to lose 🫠
There are financial products for people who are concerned about ethics when investing. The acronym for this is ESG. It wouldn't be about day trading.
But it would probably be difficult to find an anti-capitalist ESG fund. If you hate what nearly all companies do then it's going to be hard to build a diversified portfolio.
Can you expand on what you mean here? Savings accounts are insured/guaranteed by the FDIC.
Only up to 250,000 or so typically. Not that I have that much saved right now. But in general I want to have options.
Okay cool, glad you're aware. You can always just open a second savings account at the same bank when you start bumping up against the limit.
I'd recommend having some money in a different financial institution. If a bank's systems go down (like happened with Patelco, due to a cyberattack) then you'll still have your money eventually, but might not have easy access to it for a while.
Very good point.
I have a friend that invested his savings into his family by buying their debt. He gives them an interest rate that’s lower than what a bank would give and they give him a return rate that’s higher than what the market will give. Everybody wins. Of course this requires you to have close family with debt and them to be trustworthy enough to pay you back.
Sounds high risk of default or ruined family relationships tbh. Small amounts sure, but more than that it can get awkward really fast.
He’s at peace with the possibility they might not pay him back. He’s a very generous and decent person.
Kinda not an investment then though. I do something similar but calling that money an "investment" seems like setting yourself up for disappointment as by the very nature of being willing to forgive the loan its much more of a gift, and certainly isn't something i'd want to plan my savings/future on.
To add another caveat, as someone who, in years past, had to arrange loans between family members for significant sums: you need to be careful with interest rates and loan terms, as there may be significant legal constraints that may apply very unevenly. In our location, usury laws placed legal maximums on interest rates that applied to personal loans between family members but did not apply to banks, and the legal maximum could be below standard bank rates or potentially market return.
Hmm interesting idea, but having to manage something like that makes me a bit uncomfortable. Seems like it'll add a weird flavor to a relationship...
Extremely high risk, but also has the potential for highest possible (non monetary) returns. I would only ever advise doing this with no interest and ridiculously low monthly amount and fully expect for the money to be completely gone the moment it leaves your account. The reason for not charging interests is because people are really bad at calculating compound interest: the story will be remembered as usury and predation unless you only get back what you lent out. If they want to give you extra out of the goodness of their hearts at the end of the term, that would be a bonus.
I wouldn’t really call it an investment if you don’t charge interest. It’s fine if you want to help out a relative financially, but if you’re trying to plan for retirement, giving your friends 0% interest loans is counterproductive.
I wouldn't call it an investment either. Probably best to think of it as a straight financial loss. But that would be the terms under which I could live with.
He gave each person a spreadsheet showing exactly how much they need to pay each month until everything is paid off.
My parents had been burned before doing similar. It's only ever remembered as "they made money off of us when we were the most in need" unless it's set up exactly like I stated above. Also when people think you have that kind of money to lend out, they hate you for it; my parents were basically walking on egg shells for the years they waited to be paid back, lest any off hand remark or gifts they bring or meals they share felt like debt-rushig or showing off. But in the end, after it's all over and the family/friend is no longer in a financial bind, everyone relaxed and relationship became much closer. See above: high risk / high reward.
Your buddy has better family.
There's also the very legit issue in that family/friends are generally the last to get to get paid back.
Even when people mean well, if something bad happens, you're probably at the back of the line for payments. You're not going to tank their credit/evict them so naturally more important creditors come first, and that can mean not getting your money back for a long long time.
This is healthier in the long run financially for the one who took the loan, but it's not going to be anywhere near stock market/standard investment returns, and of course that's before you get into the social awkwardness of it all.
If you want to avoid the private sector entirely then your only choice would be to stick to public bonds from the federal government, other national governments, and local governments. You will likely not be able to get as good of a return, but it is what it is.
I would guess that if you're avoiding the private sector buying government bonds to a government that then supports the private sector is kinda counterproductive to the goal, but yeah it's probably your best option if you're ok with that.
Perhaps you could let us know why you're seeking another option? For instance, are you looking for something more ethical, or something more exciting with higher risk and higher reward, etc.?
Sorry - yes, something more ethical. Updated the post
Funding a small local business or co-op is likely more ethical but it is a lot more risky.
In the USA, you can invest up to $10k a year in TIPS via TreasuryDirect. The rate is often better than on the open market. You will get hit with taxes when you withdraw prior to retirement.
You can invest directly in municipal bonds, usually tax free
You can put money in a Roth IRA/ backdoor Roth IRA and invest in a bond ETF/ mutual fund like BND. TLT is an easy way to invest in treasuries.
There are also plenty of small market cap stock market ETFs and mutual funds. Small caps might be a solid choice right now.
You can also invest in gold/ real estate. Perhaps not the best time, but who knows.
I know this is not what you are asking for, and in truth is likely much closer to the opposite. I think that investing in almost anything but the private sector will likely be so inefficient that you will lose out of a significant amount of personal wealth while also not harming the companies you want to avoid supporting. The most important part of that equation to me is not having money to personally donate to causes that could use my support. If I didn't have good returns on my retirement, then I would feel much less comfortable to donate 10% of my income to local organizations, like my local NPR branch, etc. The choice I ended up making was to diversity my investing enough to lean away from the large cap stocks (Nvidia, Tesla, Meta, Alphabet). This reframing of my investing allowed me to have excellent returns but feel better about the output. I know this isn't helpful necessarily but did want to share a potential alternative.
What did you end up investing in ?
So my thought was to avoid investing by diluting my contribution to the US Large caps. My strategy is honestly a bit annoying, but I invest in the following:
Then I do this at 50:50 for international and US based ETFs to diversify and spread out the impact. I rebalance on January 1st every year.
What's your risk tolerance like?
There's an almost unlimited amount of different things to "invest" in. the question is how sure does the bet have to be for you?
Not sure but what are some of the higher risk ones you're referring to?
That homeless guy outside the grocery store who won't stop talking about the new type of jet engine he designed.
There's literally no limit to the number or the risk... because the risk of what I just stated is all your money, but there are ways that you can have theoretically unlimited risk exposure by trading options, shorting stocks, etc.
Fractional real estate investing may fit the bill.
For example, you buy fractions of some portfolio of real estate in the form of a REIT and then collect a similar fraction of the rent each month in the form of a dividend.
If you want something closer to traditional home rental income you can purchase fractions of homes as part of a large group through some some services. You and say 100 other people buy 1 home and split the rental income each month. However.. I looked into that some years back and found no reputable company with actual inventory so not sure if that model is actually working.
Real estate investing seems not particularly ethical unless all parties feel like they're getting a fair shake
It seems unfortunate that providing people with a place to live is assumed unethical by default. But I suppose it’s true of any service that really matters that there are good and bad ways to do it.
Many people need cars too, but car dealers don’t have a good reputation.
If you want to protect your wealth against inflation in a relatively morally neutral way, investing some percentage into gold may be an option (of course, it shouldn't grow after adjusting for inflation). It also may be worth doing your due diligence to find a mutual fund with rigorous ethical standards (those with a religious affiliation or certification of some sort in particular may be worth looking into).
Buying US securities direct from the US government will cut out a lot of middlemen and be federally tax exempt in a way that regular CDs are not.
There are options from 4 weeks to 30 years. Interest rates are almost always better than any regular bank offers. Because this is the kinda stuff your bank buys.
No, they aren't federally tax exempt. They're exempt from state and local taxes.
(Apparently there is one exception when using certain bonds to pay for higher education.)
Also, there are muni bonds which are tax exempt.
I keep switching that around dammit......
I'm only able to remember it now because I've gotten it wrong before...