Dividend Investing and Socially Responsible Investing (SRI)

Investing in the stock market can be a challenging yet rewarding activity, but it's important to remember that with investing comes some level of risk. Two popular methods of stock market investing are dividend investing and socially responsible investing (SRI). Let's take a closer look at each strategy.

Dividend Investing

Dividend investing is when an investor purchases stocks of companies that pay dividends. Dividends are a portion of a company's earnings that is paid out to shareholders in the form of cash or additional shares. This strategy is attractive to many investors because it provides a reliable income stream and it can also potentially provide a long-term steady income for retirement. The main disadvantage of dividend investing is that it’s not always the most profitable investment strategy for all investors. Companies that pay dividends have less capital to invest in growth opportunities compared to those companies that reinvest their earnings back into the business.

Socially Responsible Investing (SRI)

SRI is a strategy that is growing in popularity. As its name suggests, SRI refers to an investment strategy that takes into consideration a company's social and environmental impact in addition to financial performance. SRI investors seek to invest in companies that align with their values and beliefs while simultaneously investing in their own financial future. SRI investors pay particular attention to companies' policies, practices, and performance in areas such as diversity and inclusion, environmental sustainability, labor relations, and corporate governance. Companies with good track records in these areas are rewarded with investment capital from SRI investors, thereby helping to incentivize good corporate behavior.

What are the differences?

The fundamental difference between these two investment strategies lies in the goals and values of the investor. Dividend investing is primarily focused on the financial return generated by the stock, whereas SRI is interested in the social and environmental impact of the company being invested in. Dividend investing may be a good strategy for those investors who are looking for a steady source of income, while SRI may be a good fit for those investors who prioritize using their investment dollars to support companies with positive social and environmental impact.

Conclusion

In conclusion, dividend investing and socially responsible investing are both valid investment strategies. An investor's decision on which to pursue ultimately comes down to their personal goals, priorities, and values. It's important to do your own research before making any investment decisions and consult a financial advisor if needed. By understanding the strengths and weaknesses of each strategy, you can make an informed decision on which investment strategy is right for you.