Excerpted and adapted from The Resilient Investor by Hal Brill, Michael Kramer, and Christopher Peck
The world in which we live is volatile, uncertain, complex and ambiguous. There’s an unfathomable intertwining of relationships that underlie the global economy and the physical world, making predictions virtually impossible. As financial advisors, it hasn’t been easy for us to overcome our desire for certainty about where the world is heading. But once we acknowledged that the world may not be sitting on the most solid of foundations, and that our clients hold a range of views about our possible futures, it became essential to explore strategies that speak to both emerging innovations and local resilience.
Even a few years ago, such a multifaceted approach would have been impractical, as there were few opportunities to invest in alternative strategies. Today, we are energized by the explosion of socially responsible investing (SRI) options that don’t come from Wall Street. In recent years, formerly obscure niches such as international microfinance, local food systems, and “social purpose bonds” have catapulted into categories recognized by institutional investors.
One option we particularly like is the “Close to Home” strategy, which brings economics back to its roots: the household, the community, and the structures and systems that support our most fundamental well-being. Close to Home investing recognizes that much of what we already spend time, money, and attention on are rightly considered investments, including our personal health and skills, family and home, community organizations, and our intimate, professional, and community relationships.
Today, it’s rare for people to consider investing in one’s hometown, but in the past, this was the only place where most people spent, loaned, and invested their money; even our time at work was usually at a local business, rather than as part of the global economy. Now, as then, the lion’s share of our time (at least away from work) is spent close to home, and a big chunk of investment wealth may be here as well: our literal home—a house and land—is the largest (and often only) asset many people own.
In Local Dollars, Local Sense, a thorough survey of the local investment movement, Michael Shuman makes a compelling case that small businesses comprise about half the GDP of the United States, but most investors are completely missing out. Overinvesting in Wall Street and underinvesting in Main Street is a diversification problem that we aim to help you overcome. A simple guideline for this strategy is to invest in what you know, in what you can see and touch, and in who and what’s around you. Local investments that are close at hand are easier to track and influence; when you’re close to what you’re invested in you can intervene if there’s a problem and weigh in on positive change.
Close to Home is fundamentally about intimate, face-to-face relationships. Returning more of our focus to this time-tested strategy represents a rebalancing, as we step back from our immersion in a global system that Don Shaffer, formerly of RSF Social Finance describes as “complex, opaque and anonymous, based on short-term outcomes,” and we begin to embrace the virtues of local engagement, which is “direct, transparent, and personal, based on long-term relationships.” Shopping at the farmers market you exchange cash for carrots. You can see exactly how orange and crisp they are and talk with the farmer who grew them—if the carrots are sweet, you’ll be back for more. The Close to Home Strategy seeks to apply the same immediacy and connection to its other investment activities.
