This week, we observe the 45th anniversary of Earth Day. Since its 1970 inception, Earth Day has inspired millions of people to improve the environment.
But lessons of environmentalism can also be applied to other areas of life — such as investing.
Specifically, as an investor, you may want to follow the three Rs:
• Reduce — Many of us probably own more things than we need. If everyone else on Earth used as much stuff as we do in the United States, the planet would need three to five times more space just to hold and sustain everybody, according to the National Institute of Environmental Health Sciences.
So it might be smart for all of us to streamline our possessions. And the same could be true for our investments — it’s not always a case of “the more, the merrier.” It’s particularly important not to own too many of the same types of investments, because you could suffer a setback in a market downturn that primarily affects those assets.
• Reuse — One way of being environmentally conscious is to repair, rather than replace, durable goods such as bicycles, washers and dryers. After all, new is not always better. Many investors are also prone to tossing out the old and bringing in the new — and not always with the best results. For example, some investors switch their overall strategy every so often in attempts to capitalize on some trend.
But you’re almost certainly better off by sticking with a long-term strategy appropriate for your goals, risk tolerance and time horizon. Of course, within your strategy you can make adjustments as your circumstances change, but there’s probably no need to toss your entire approach overboard. As you invest, always be aware that your investments' value will fluctuate, and there are no guarantees that you won’t lose value.
• Recycle — Aluminum cans become airplane parts, old phone books transform into textbooks and plastic beverage containers may become carpeting. It’s amazing how recycling can give new life to old, unwanted products.
In a way, you can also “recycle” investments that no longer meet your needs, either because your circumstances have changed or because the investments have become fundamentally altered — as is the case when a company in which you invested has shifted its focus or taken its business in a new direction.
Instead of liquidating the investment and using the cash to buy, say, an ultra-high-definition television with all the bells and whistles, you could find new use for your investment portfolio's proceeds. To name one possibility, you could use the money to help save for a child’s college education. Or you might use it to help fill other gaps in your portfolio.
By following the reduce, reuse and recycle philosophy, you can help make the world a greener place to live.
And by applying the same principles to the way you invest, you can create a healthier environment in which to pursue your important financial goals.
This article was written by Edward Jones for use by your local Edward Jones Financial adviser.
This article originally appeared on Crestview News Bulletin: SHANKLIN: 3 tips to environmental investing