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Gains in good conscience: there is a way to make money on Wall Street and guarantee that your investment is helping the struggle for gay equality.

For a growing segment of GLBT bears and bulls, the cost of investing in a company they oppose for political or religious reasons isn't worth the benefits of playing the market.

Sure, it's easy to avoid oil companies or military defense stocks, but what about companies that don't offer domestic-partner benefits? What about those that pump millions of dollars into antigay political campaigns?

It's difficult to track even one company for all these issues, let alone the dozens that make up any mutual fund. That's where socially responsible investing comes into play. Socially responsible investing has grown into a powerful force on Wall Street, with investors putting money into companies based entirely on strict environmental and social criteria. The firms that manage socially responsible investments, through either mutual funds or individual accounts, spend their time researching every company--and even pushing for changes on policies they don't like.

One of the biggest arguments against investing in socially filtered funds is that it is much harder for them to earn a solid return each year than portfolios with no social restrictions. Given the size and diversification of most major U.S. companies, it's hard for any major stock to qualify for social funds since the actions of any one of a company's many divisions or affiliates could knock it out.

"There's a lot of debate about if you can get similar retinas from a socially conscious fund," says Jill Hollander, a certified financial planner with Financial Connections, an investment advisory firm in Berkeley, Calif. "Because it's using only a portion of the economy, these funds might not be as diversified as general funds, but we've still seen more and more people going that way when looking to invest."

As with all investing, there are good and bad socially responsible funds. It's up to the investor to do some research before putting money down on a fund. Many funds have thrived for long periods of time. The Chicago-based Ariel Fund, for example, has proved to be a long-term winner, with a 16% return in 2004 (compared with 6% for the Standard and Poor's 500 stock index, a common measure of overall market performance) and a 14% annual return since its inception in 1986 (compared with about 12% for the S&P 500). The fund uses a filter to avoid stocks in tobacco, nuclear energy, and weapons. It also looks for companies that promote diversity.

Trillium Asset Management Corp. of Boston goes a step further with its activism in investing. The firm urges companies to make changes in corporate policy; its actions have included pushing oil giant ChevronTexaco to clean up polluted lands on Indian reserves and successfully backing a proposal at steelmaker Nucor to include gay and lesbian workers in the company's nondiscrimination policy.

Another important question asked about social funds is, "Do they really make a difference?" While many mainstream investment houses take the view that social investing does little more than make investors feel better about themselves, social investment firms strongly argue that they do make a difference.

Any shareholder who owns more than $2,000 worth of stock for more than a year may propose a resolution at a public company. These proposals are then voted on at the company's annual meeting. This allows fund managers at socially conscious firms to advocate for change within corporations by getting issues out in front of other investors.

"Looking at the many advances in 2004, it's obvious that the proxy [shareholder proposal] continues to be a powerful agent for change," wrote Neil Stallings, director of shareholder advocacy at Progressive Asset Management in Oakland, Calif., in a recent update on corporate governance victories.

And the force is still gaining power. The amount of stock controlled by socially concerned investors has risen from $725 billion in 1997 to well over $1 trillion today. Companies have learned that attracting such investors can be beneficial over time, as they tend to be more loyal than a typical investor.

"Social investors tend to be sticky," says Jay Falk, president of SRI World Group, the company that owns, a Web site devoted to socially responsible investing. "They trust that the financial, social, and environmental strengths of their investments will create long-term value, even when bearish short-term prospects scare other investors."

Tax-tip time

April 15 is just around the corner, so Americans everywhere are looking for ways to reduce their tax bills. While gay and lesbian couples still aren't afforded the recognition of straight couples by the federal government, experts say that they can still reap the benefits of smart tax planning after heeding a few easy pointers.

Not surprisingly, the first bit of advice tax professionals give is to recommend everyone hire a tax professional. But considering how much money a person or couple can save from planning a tax strategy, it is often well worth the investment. For the average person or couple, here are some basics:

Save money in an individual retirement account (IRA).

This tax year individuals can contribute up to $4,000 annually ($4,500 if older than 50) to IRAs and deduct that amount from their taxable income. So while you save for your future you can also reduce your tax bill--or even drop yourself to a lower tax bracket and tax rate.

Keep track of educational and professional expenses.

Interest from student loans may be deductible. So may be books and other school supplies. The same goes for other purchases related to your job, such as that power lunch.

Use U.S. savings bonds to earn tax-free income.

Just like with IRAs, the gains you make from federal savings bonds are generally not subject to tax.--M.H.

To give is better

Same-sex partners can utilize existing tax laws to benefit as a couple. If one partner earns substantially more money than another, for example, it makes sense for the richer of the two to "gift" a portion of their income to the poorer. This way, the tax liability is lower for the higher income earner, who is subject to a steeper tax rate. There is an $11,000 limit on gifts to individuals, creating a major opportunity to reduce your tax bill.

Hudson has written for The Detroit News and Knight Ridder newspapers.
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Article Details
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Title Annotation:Debt & Taxes
Author:Hudson, Mike
Publication:The Advocate (The national gay & lesbian newsmagazine)
Geographic Code:1USA
Date:Mar 29, 2005
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Next Article:Gay Marriage Inc.: same-sex couples who want to form a corporation to get financial benefits should think twice before trying the risky maneuver.

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