So why would progressives be interested in accumulating wealth? We're not in it just for the sport, or for the gambler's high. We want to live comfortable lives, but we also want to use our money to make a positive influence in the world, whether for our children's college education, by donating to charities, or through our support of progressive politics. As I see it, there are three prime directives to progressive investing:
A. Maximize the return on investment so you can use your money to improve the world
B. Reward those businesses with progressive policies toward their workers, their communities, and the environment
C. Support new technologies, such as alternative energy, which will make the world a better place in which to live.
OK, so now we have some goals, but now what? You've got a pile of cash in savings earning infinitesimal interest, and you need to know what to do next. The details are what the investment club is all about, but here are a couple of tips to help you get started and become at one with your money.
i. You don't know very much, but that's OK. The key to competence in investing, as in anything, is not how much you know. Competence means being aware of what you do not know, and acting accordingly.
ii. Investment professionals don't know very much either, and they aren't any smarter than you are. A common gauge of investment performance is the Standard and Poor's (S&P) 500, which is the 500 largest stocks in the U.S. markets. If you have a monkey throw darts at a listing of these companies and invest accordingly, half the monkeys will do better than average and half will do worse. Professional mutual fund managers are smarter than the average monkey, but from 1993-2003, domestic stock funds averaged an annual return of 8.19%, but the S&P 500 returned 10.04%. There are reasons why the pros are outperformed by monkeys throwing darts, and I'll have more on that in a later diary entry, but suffice it to say there is no reason you should be awed by people for whom investing is their job. Naturally, you really don't want to give them any of your money when it would be much cheaper to rent a monkey.
iii. You win some, and you lose some. Unlike in Las Vegas, however, if you have sound strategy, the longer you play it will average out in your favor so you will be richer than when you started. You can choose your own risk level, which is pretty much like choosing between the roller coaster that looks like a choo-choo train or the one where you have to sign a waiver before boarding. Just make sure you don't to the investing equivalent of putting your retirement on red and giving the wheel a spin.
Now that you've had the 5-minute Zen of Investing tour and you are fully aware you know absolutely nothing, what is a beginner to do? The answer is easy - open a brokerage account. That means taking some money from your nice FDIC insured savings account earning pitiful returns and putting it in a brokerage account. You shouldn't really have to deal with an actual "broker", except perhaps to set up your account. Your brokerage should have an easy way for you do transactions and view your account on-line. By default, your money should probably be in a money market fund. I have no idea what that truly means except that your money will now be earning a little more than the pitiful interest you had at the bank. That's OK for now, as you learn more and get ready to dip your toe into the markets. I use a perfectly adequate brokerage for myself, but I don't know enough about them to recommend any in particular. Perhaps people can give their own recommendations in the comments, or someone can write up an Investment Club entry on the subject.
I wish to stress that the DailyKos Investment Club is not my project - it needs to be a collaborative effort since writing about 5 of these will pretty much exhaust my investment knowledge. If you have any investment insight on progressive companies, exciting new technologies, and how to profit from Republican failure, write it up. While any single diary (including this one) should be taken with a grain of salt, the collective wisdom at DailyKos can make us all better investors.