Community investing is using your investments to create resources and opportunities for disadvantaged people who are under-served by traditional financial institutions. Your participation in this kind of impact investing could help people attain home ownership, start small businesses, or address other community needs. If you open an account at a community development bank or credit union, you’re already doing community investing!

High-impact community investments are not necessarily the best way to grow your wealth, but rather to better the world and also diversify one's portfolio. High impact options are generally one to five-year investments that offer market or below-market returns (0 percent to 4 percent) depending on how the market is performing, and may not be insured. Community development banks and credit unions can be FDIC or NCUA-insured. Community investments have high impact because investor money can reach borrowers who are most in need of funds to strengthen their communities.

If you're trying to grow your wealth while also changing the world, there are other ways to engage in socially responsible investing.

As a reminder, always do your research before investing.

Main types of high-impact investing:

• Community development banks or credit unions support job creation, affordable housing, small business, and healthy communities. They area a great alternative to conventional mega-banks that finance fossil fuel infrastructure, sweatshops, factory farms and other destructive industries.

• Community Development Loan Funds provide affordable financing for housing and economic development projects, cooperatives, and community-based nonprofit organizations. These loan funds are not insured, although they use grant money and loss reserves to help protect individual investors.

• Micro-enterprise Loan Funds provide small loans and training to entrepreneurs in the US and overseas to create economic development and jobs.

• Community Development Venture Capital Funds provide loans to businesses that are creating jobs in low-income communities.

• Pooled Investment Portfolios are a great option if you want to diversify your community investments. You invest through one large facility, which spreads the money out within a pool of institutions that serve many low-income areas in a variety of ways.

• Mutual Funds are collections of stocks and bonds that are managed by professional money managers, meaning that expert investors are doing the research to pick investments. Anyone can invest in mutual funds. Some socially responsible funds devote up to ten percent of their assets to community investing, and several even put 100 percent of their assets into underserved communities. With these funds, you can use your investment dollars to promote corporate responsibility and contribute to improving disadvantaged communities, while saving for your own retirement. These funds are not federally insured.

How much will my investment returns be affected?

It depends on what type of community investing product you choose.

• If you choose to open accounts at a community development bank or credit union, you'll find the interest rates to be comparable to those at traditional banks and credit unions.
• With community development loan and microenterprise funds, you will often find the returns to be in the 0 percent to 4 percent range.
• The interest on venture capital funds varies.

No matter what the market is doing overall, experts agree that every investor should have a diversified portfolio to minimize risk and achieve a variety of investment objectives. Community investing can be an important part of a diversified portfolio.

How safe is my money when I do community investing?

Accounts at community development banks and credit unions that are federally insured are just as safe in these institutions as they are in traditional banks or credit unions.

Community development loan funds, microenterprise funds, and venture capital funds are not insured—and the same holds true for mutual funds with community investment components—so the risk is higher. Be sure you're fully educated about these options before you decide to invest.

How much of my money should I use for community investing?

Even one percent can make a big difference for communities. If every socially responsible investor put one percent of their portfolios into community investments, it would triple the funding put into rebuilding disadvantaged communities. That money could build more day care centers and schools. It could provide micro-loans to single parents or former welfare recipients wanting to start small businesses. It can help a low-income family build a home, save for their children’s education, or pay debts.