What should I consider when deciding whether to invest in a company?
You should weigh a number of factors when deciding where you want to spend your investment dollars. The financial outlook of a company is a no-brainer — how is the company doing financially and what kind of returns can you expect? — but there are other nonfinancial considerations, as well.
Remember that when you invest in a company, you're helping that company do what it does. If you don't agree with what that company does — or perhaps more importantly, how it does it — then you don't want to invest in that company.
Investment strategies have been built around the idea of socially responsible investing, or investing in companies that stay on the right side of important social issues like human rights, fair trade, and environmentalism. Of course, what you consider "the right side" is entirely up to you as an investor.
For example, if you believe in the importance of renewable energy for Earth's future, you might limit yourself to businesses that encourage (or even develop) green technologies and avoid companies that are heavily into oil or that have broken environmental protection laws. Vegans, vegetarians, and animal rights activists might invest only in companies that don't exploit animals — from animal testing to using horses in their commercials. Still others might avoid investing in companies that extoll or support opposing religious or political views.
A number of certification agencies can guide you toward companies that agree with your sensibilities. Here are just a few:
- Fair Trade USA certifies that goods come from farmers and workers who are justly compensated, promoting human rights and local economies around the world.
- A LEED (Leadership in Energy and Environmental Design) certification means that a building has been designed and built for sustainability, water conservation, energy efficiency, and indoor environmental quality.
- Green Seal certifies goods and services that meet the highest standards of environmental quality and performance, promoting a sustainable green economy.
- PETA (People for the Ethical Treatment of Animals) maintains a "Caring Consumer Database" that lists companies that do and do not test products on animals.
When you're thinking of investing, whether or not your investment will make money is certainly an important consideration. But investing in a company is your way of showing your support for that company.
Make sure you invest in a company you believe in.