Do you want your investment decisions to have a positive impact? Do you find it difficult to concern yourself with what's happening in distant countries when you see plenty of problems that need solving in your own neighborhood? If so, community investing might be the solution. In this article, we'll explain how this type of socially responsible investing works, and how to make it work for you.

What Is Community Investing?

澳洲幸运5官方开奖结果体彩网:Community investing is a subcategory of socially responsible investing. It allows you to direct your investment dollars t𝓡oward a specific community—often your own. Investment dollars are put to work to provide safe and affordable housing, job opportunities, education, healthcare, financial counseling, child care, and other essential community services.

The goal of community investing is to earn returns for investors while contributing to noble causes. It also facilitates investment in underserved communities more broadly if there isn't a specific community on which you want to focus.

Institutions with community investment opportunities help individuals and businesses who otherwise couldn't obtain financing, and allow people to help themselves in the long-term. According to the U.S. Sustainable Investment Forum, community investing is one of the many fast-growing areas of socially responsible investing.

How to Invest in Your Community

Since com💯munity investing encompasses a broad range of activities, there are many options for pursuing a commun♚ity investment strategy.

Community Development Banks

Instead of choosi🐽ng one of the usual options for your checking and savings accounts, you could keep your money at a community development bank.

These institutions lend to individuals and businesses that otherwise couldn't get a loan. Like traditional banks, community development banks are insured by the 澳洲幸运5官方𒆙开奖结果体彩ꦦ网:Federal Deposit Insurance Corporation (FDIC). Unlike traditional banks, though, they focus on serving a low- to moderate-income clientele.

You can find banks certified by the U.S. Treasury Department as dedicating 60% or more of their services to low-income communities at the website.

Agency Bonds

Investing in 澳洲幸运5官方开奖结果体彩网:agency bonds is another form of community investing. Agency bonds are issued by government agencies like Ginnie Mae and by 澳洲幸运5官方开奖结🎀果体彩网:government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac🎐. These entities help provide housing to people who otherwise couldn't a🐓fford it.

GSE bonds, which help fund Fannie Mae and Freddie Mac, are not government bonds. This means they are not backed by the 澳洲幸运5官方开奖结果体彩网:full faith and credit of the U.S. government like Treasury bonds are. These GSEs are shareholder-owned corporations, ꧟and you should research their bonds and evaluate their credit risk as you would other corporate bonds.

Agency and GSE bonds are like other bonds—they have inflation risk. Some carry 澳洲幸运5官方开奖结果体彩网:call risk but have relatively low credit risk. You'll earn slightly better returns with these bonds than with Treasuries because of the additional risk. The interest from all of these bonds is subject to federal income taxes. Treasury bonds are exempt from state and local income taxes. Most agency and GSE bonds are not exempt from state and local taxes, but a few types are, depending on the issuer and bond type.

Ginnie Mae is a government agency, and investments in its securities carry the government guarantee and theoretically don't have any 澳洲幸运5官方开奖结果体彩网:default risk. If you want to invest in Ginnie Mae, you'll invest in 澳洲幸运5官方开奖结果体彩网:mortgage-backed securities (MBSs) rather than bonds. You can purchase Ginnie Mae securities through a brokerage with a minimum of $25,000 to start investing.

Other Options for Community Investment

• Buy real estate in communities of poverty to provide affordable housing for low-income tenants and to revitalize neglected neighborhoods.
• Invest directly in community development loan funds or pools.
• 澳洲幸运5官方开奖结果体彩网:Invest in socially responsible mutua🅘l funds with a community investment focus.
• Invest directly in municipal bonds in underserved communities to help fund infrastructure, educational facilities, and public goods and services.
• Buy stock in publicly traded companies that invest in underserved communities. This strategy is a less direct form of community investing, but it provides an option for investors seeking higher returns than those available from fixed-income community investments.

Rewards of Community Investing

Community investing can be very rewarding if everything goes according to plan. You'll create wealth for yourself from the return on your investment, and you'll create wealth for others by improving their economic opportunities.

At its best, community investing is comparable to charitable giving, but with the potential for you to get a monetary return. If your investment loses money, you may get some consolation from deducting your losses on your tax return and knowing you're not financially worse off than if you had donated the same sum.

The other reward from a successful community investment plan is personal. You get results you can see when you improve the lives of individuals in your community. You may even improve your own experience of living in the community if you're investing close to home.

Drawbacks to Community Investing

Community investing also has drawbacks. It can entail higher risk; you're often investing in people and businesses that traditional lenders consider too risky. Furthermore, your additional risk isn't necessarily compensated with higher returns the way it would be in traditional investments.

It also restricts your investment options, and many community investments are in vehicles that provide low returns, like savings accounts and government bonds. To earn a high enough retur🦩n to meet your long-term financial needs, you'll need to broaden your exposure beyon൩d these low-return investments.

You can meet this need by investing in the stocks of companies with a strong community focus or by expanding your parameters to include the broader universe of socially responsible investments. Many investors will find that it makes the most financial sense to pursue community investing in only a portion of their 澳洲幸运5官方开奖结果体彩网:portfolios. However, that doesn't mean you have 📖to choose investments that you're morally opposed to in the remainder of your portfolio.

Community investing is al🐭so often more time-consuming than traditional investing. Instead of just l𓆏ooking at risk, potential returns, and fees, you also have to take a hard look at whether the investment meets your standards for serving the community.

The Bottom Line

While community investing's goal, like other types of socially responsible investing, is to earn investment returns while also doing good, this isn't to say that traditional investment methods don't also do good. In fact, there's plenty of overlap between the two categories. However, if you want to pursue community investing intentionally, take a hard look at your investment options before you dive in to make sure your money will serve your desired purpose.