Just Give: Resources for Philanthropy & Thoughts on Effective Altruism

Nick Levinson Life with Money

For those of us fortunate enough to have the interest and financial capacity, the end of the year is often the time to make charitable gifts. Many of you contribute to schools you attended and local non-profits, and those gifts are typically much needed and appreciated. In addition to the good these organizations are doing in the world, there is also still a tax benefit available for gifts to non-profits. (Please check with your tax professional to confirm the details of how much of your gifts are deductible.)

We’ve recently come across a number of additional ideas for philanthropic giving that we want to share with you.
donation
A website that I’ve found to provide good information about charities as well as broader topics relating to philanthropy is GivingCompass.org.

Nicholas Kristof, a New York Times columnist and two-time Pulitzer Prize winner, also publishes an annual list of organizations he thinks are making an enormous impact. He profiled several of these organizations in his November 26 piece, “Time for Gifts of Meaning.”

Yet another broad organization/movement that’s been in the news lately is Effective Altruism (see recent stories from The New York Times, “FTX’s Collapse Casts a Pall on a Philanthropy Movement” and “Effective Altruism, on the Defensive,” and The Economist, “What Sam Bankman-Fried’s Downfall Means for Effective Altruism”). EA started in 2011, led by an Oxford professor named William MacAskill. It builds on and updates utilitarianism, which you might remember from reading John Stuart Mill and Jeremy Bentham in college philosophy classes. The update comes in the form of new methods of data analysis that attempt to determine which organizations are currently doing the most good for the most people. In addition to MacAskill, another academic associated with EA is Peter Singer, a philosophy professor at Princeton. An interesting podcast called People I (Mostly) Admire, hosted by Steven Levitt, a University of Chicago economics professor and co-host of Freakonomics, recently featured Singer (10/14/22) and MacAskill (8/19/22). They have provocative takes on, among other topics, animal welfare and long-term thinking (MacAskill calls this “long-termism”). Singer is associated with TheLifeYouCanSave.org, and MacAskill with GiveWell.org.

Effective Altruism has been in the news recently in connection with FTX, the cryptocurrency exchange that filed for bankruptcy in November, and its founder and former CEO, Sam Bankman-Fried, who was arrested in early December on charges related to FTX’s collapse. Bankman-Fried was a disciple of MacAskill, and the largest contributor to Effective Altruism causes. These include global economic development, pandemic preparedness, and, more recently, “AI safety,” which involves safeguarding humanity against potential harm from artificial intelligence technology.

Some of the potentially less savory aspects of Effective Altruism came to light in Bankman-Fried’s downfall. One of these is “earn to give,” in which some EA proponents were encouraged to pursue lucrative careers in finance and technology so that they could give away large amounts to EA causes. Many believe Bankman-Fried took this concept to a dangerous, and fraudulent, extreme. MacAskill lamented the impact on EA: “Sam and FTX had a lot of good will – and some of that good will was the result of association with ideas I have spent my career promoting. If that good will laundered fraud, I am ashamed.” Earn to give sounds reasonable to me in theory but presents an enormous opportunity for backsliding and outright fraud in practice, as Bankman-Fried appears to demonstrate. (Remember, though, that he’s only been charged so far, not convicted of anything specific.)
magic door
Some of Effective Altruism’s other ideas strike me as a little far-fetched. Long-termism, in particular, with its claim that we should give as much consideration to people 1,000 years in the future as we should to people living 1,000 miles away, seems interesting but difficult to pursue in the context of so much current global suffering. On the other hand, this kind of thinking does argue for work to prevent climate change, prepare for future pandemics, and avoid the potential excesses of artificial intelligence, all of which will likely help the living as well as the not-yet-alive. So, despite the recent negative publicity, it appears that EA continues to promote good works around the world.

We hope these resources provide some ideas to help with your giving. Please feel free to send us links to your resources so we can compile additional ideas for 2023 and beyond.

One Step Forward, or the Fragility of Recoveries

Nick Levinson Comments, Life with Money

As occurred in July through mid-August of this year, stock markets around the world have seen significant gains in October and November 2022. The total US stock market rose about 8% in October and 5% in November. International stocks increased 3% in October and 13% in November. Bond prices have also gone up recently, with gains between 1.5% and 4% for November depending on maturity and credit risk. These bond price increases have accompanied substantial declines in interest rates, with the benchmark 10-year Treasury falling from 4.3% in mid-October to 3.7% at the end of November.
headache
What’s been driving these gains?

As always, many factors come into play, but the most significant appear to be the recent declines, albeit modest, in inflation rates around the world. This has encouraged hopes among investors that the US Federal Reserve and other central banks will begin to moderate recent interest rate increases in their attempts to slow inflation.

The big question is whether these gains will persist and mark the beginning of a recovery from the still-significant declines of 2022. Or will they disappear in the face of higher inflation and/or other factors, as they did over the summer?

As you know, PPA doesn’t make predictions about short-term market price movements. There are simply too many moving pieces that we know about, along with a long list of possible factors that we don’t yet know anything about. That’s why we encourage clients to stick with asset allocations appropriate to their long-term financial situations, making changes as situations change, not in response to markets rising or falling over weeks or months.

As always, PPA advisors are available to consult if you have questions or concerns as we go through these challenging, uncertain times together.

Tax Loss Harvesting: Silver Lining in a Down Market

Nick Levinson Life with Money

With stock and bond prices still down significantly for 2022, one opportunity for a “silver lining” comes in the form of tax loss harvesting. This involves selling investments in taxable accounts that have declined in price, thereby “realizing” losses. (Tax loss harvesting doesn’t apply to retirement accounts like 401Ks and IRAs.) These losses can be used to offset gains from sales of capital assets, including investments and real estate. If the losses exceed the gains for a specific year, you can typically deduct up to $3,000 of ordinary income on your tax return for that year. Any losses beyond the offset of gains and the annual deduction for the current year can be “carried forward” indefinitely. It’s a good idea to check with your tax professional before deciding whether, and if so, how much, tax loss harvesting to pursue in a particular year.
tax loss harvesting
If you decide to do some tax loss sales, Park Piedmont Advisors typically recommends reinvesting the sale proceeds in similar investments to maintain the asset allocations we’ve developed with you. (The “wash sale” rule disallows the loss if you buy back into the same investment you sold within 30 days of the sale.) Depending on the amount of the sale proceeds, it might also make sense to re-invest over time, which we often refer to as “dollar cost averaging.”

Please feel free to contact your Park Piedmont advisor to discuss whether tax loss harvesting makes sense for you.

The Financial Perils of Herding

Nate Levinson Digital Assets, Life with Money

In recent weeks, the cryptocurrency industry has dominated financial headlines due to the bankruptcy of FTX, a popular crypto exchange. As an exchange, FTX allowed people to buy, sell, and trade digital currencies.

The collapse of FTX began when reports surfaced about the company’s financial structure and levels of debt, which caused the price of FTX’s own “native currency,” the cryptocurrency issued directly by FTX, to plummet. As a result, hordes of FTX users demanded withdrawals of their money from the exchange. However, it turned out that FTX did not have the funds to cover billions of dollars’ worth of user withdrawals and obligations to creditors, due in large part to misuse of their customers’ money.

FTX’s declaration of bankruptcy sent shockwaves across the crypto and broader financial world. As the value of many cryptocurrencies including Bitcoin and Ethereum subsequently declined, other exchanges struggled to stay afloat, and investors lost billions of dollars.
cryptocurrency
Although FTX’s downfall has been a large blow to the crypto sector, it is not the first sign of struggle for the industry. Back in late 2021, initial reports of high inflation in the US caused concern among many investors about how the economy would react. Bitcoin, which is by far the largest digital currency in the world as measured by market capitalization (the current value per share of a stock or coin multiplied by the number of shares that have been sold in the market), peaked at roughly $68,000 per share in November 2021. The price of Bitcoin then declined by 19% in December 2021 and another 17% in January 2022. Ethereum, the second largest cryptocurrency, also experienced drastic price drops. Over the past year, Bitcoin and Ethereum have each lost approximately 75% of their value as investors have sold off shares en masse.

The huge price declines of many cryptocurrencies over the past year bring to mind the concept of herding. This is the phenomenon in which humans follow “the herd” and mimic the actions of the people around them, based on the assumption that those other people have a full understanding of what they are doing. This is a commonly held bias in many aspects of life but can be particularly perilous in the financial sector when investors buy what they believe other people are investing in without analyzing the investments themselves.

On a large scale, herding can lead to market bubbles, which involve the extreme overvaluation of an asset, and subsequent market crashes when the bubble “bursts” and the price of the asset plummets. For example, herding played a large factor in the “dotcom crash” of the early 2000s, and more recently in the bursting of the crypto bubble in late 2021. The dotcom bubble was driven in large part by the excitement around the popularization of the internet and so-called “internet companies” that provided online shopping, communication services, etc. The development of this new technology led to very high growth and profit expectations for internet company startups. Consequently, professional investors, such as banks and venture capital firms, rushed to get their feet in the door. As more and more money funneled into these companies, their stock prices soared. And as the potential for large price increases became apparent, FOMO (or “fear of missing out”) grew among other professional and individual investors, leading to “panic buying.” However, the craze around the internet and its potential led many professionals to ignore traditional metrics and due diligence practices. So, when worsening economic conditions revealed flaws in several internet companies’ business plans and spending practices, the herd pivoted to “panic selling” and the bubble burst. As a result, many of the new companies, such as WorldCom and Pets.com, went out of business, and many investors, professional and non-professional alike, lost a lot of money.
herding
Herding in the crypto markets was similarly driven by the actions of professional and non-professional investors. Many well-known and highly regarded financial firms such as Sequoia Capital and BlackRock sank billions of dollars into FTX and other crypto-related companies. Additionally, celebrities such as Larry David and Matt Damon appeared in commercials for FTX and Crypto.com, respectively. The FTX commercial invited herding, claiming that the exchange was a “safe and easy way to get into crypto” and urging viewers to “not miss out.” Prior to FTX’s downfall, professional athletes such as Tom Brady and Stephen Curry joined the company as brand ambassadors and promoted the platform. Cade Cunningham, the number one overall pick in the 2021 NBA draft, even went so far as to take a large portion of his signing bonus in Bitcoin via a sponsorship with the crypto lender BlockFi. BlockFi, which had close financial ties to FTX, declared bankruptcy itself earlier this week in the wake of FTX’s collapse. Between all these influences, it’s easy to see how more and more non-professional investors were drawn to crypto.

In the same way that the internet was the exciting new technology of the late 90s and early 2000s, cryptocurrencies and the blockchain have been a large focus of media attention over the past few years due to their increasing popularity and potential applications. Simply put, blockchain technology allows for secure, decentralized, and fully transparent digital recordkeeping. As one of its most widely known uses, blockchain supports the production and trading of cryptocurrencies. From the excessive optimism with a new technology, to investors jumping on the bandwagon to not miss out on the potentially massive growth of a young industry, to the eventual mass selloff, there are many parallels between the dotcom crash and the movement of crypto prices over the past year. However, it is important to remember that some of the internet startups of the late 90s and early 2000s, such as Cisco and Amazon, survived and have since flourished. Similarly, many cryptocurrencies have not completely collapsed (Bitcoin is still worth around $16,000 per share) and may well survive and grow over time.

Crypto is a relatively young industry, and the bankruptcy of FTX illustrates that actions in one part of the market can have significant ripple effects across the rest the industry. No one knows the future of cryptocurrency or blockchain technology, but for now it remains an unregulated and highly volatile market. Because of this, any crypto holdings should only comprise a portion (and a small portion at that for most investors) of a well-diversified portfolio, to mitigate the risk of extreme price swings. There is no fundamental problem with taking large risks in the market. As always, the decision on whether to shift any portion of one’s portfolio into crypto, or any other highly speculative asset, is dependent on one’s goals, time horizon, and risk tolerance.

Finally, as humans, we are all subject to behavioral biases such as herding. Whether it is the CEO of a financial institution or a person with no investing experience at all, no one is immune. However, becoming aware of these biases can allow for improved reflection on one’s own actions and motivations. When media buzz swirls around an exciting new stock, coin, or alternative investment, it is important to take a step back and evaluate whether it truly aligns with your risk tolerance and goals.

Please feel free to contact your Park Piedmont advisor for any further information or discussion.

A Thanksgiving Walk in the Woods

Tom Levinson Life with Money

A few days before Thanksgiving, motivated by above-freezing weather and a late-afternoon urge for outdoor time, I bundled up and biked a couple miles to a favorite woodsy hiking trail.

Often when I walk this trail it is empty of other people, and so as I pedaled, I presumed the same would be true. But as I turned into the postage stamp parking area, a Nissan Sentra had gotten there before me.

It wasn’t long after I shed my bike and started my walk that a thought emerged: it’s actually pretty desolate out here.

Now, don’t get the wrong idea: I’m not saying something was definitely going to happen. But there was a possibility – remote, sure, but in my “city-kid” brain, non-trivial – that something could occur. Who else was out here with me? It probably wasn’t “Jason” – I don’t know that he would drive a Sentra – or anybody super scary, but … what if it were?

I had a thought, and the thought tinted my walk.

I laughed it off – mostly! – and continued walking through the forest of spindly, skeletal trees. Nailed to one was a sign acknowledging the generosity of two families who’d donated this land for perpetual conservation, while also preserving the trail as a public easement. The last part of the sign read: “Hunting by landowner’s written permission only. Hunter orange is advised during firearm season for deer.”

I looked down. My outfit, marked by a conspicuous lack of orange. And I had no clue when firearm season for deer started and ended.

Was it safe to keep walking?

• • •

In our contemporary culture, we are trained to be attentive – hyper-attentive – to things that might happen. The news cycle bombards us with mayhem and conflict. The worst that can be done to or befall humans.

That’s so often the case in the financial and investing news scape, as well. Headlines blare about risk and recession, declines and volatility. Lurking around every corner, economic catastrophe. There’s so much to be frightened of – and some of it may come to pass.

But much of it doesn’t.
woman looking out window
Sometimes our worst fears are not realized. Sometimes they stay figments of our imagination. I’m grateful for that.

I’m grateful to take a walk in the woods. This time last year, felled by a hip ailment, I was confined to a wheelchair that surely couldn’t make it over roots and leaf piles.

I’m glad my face is uncovered and grateful that many of us, including friends and colleagues, are able to travel to see their families for the first time in years.

I’m grateful for a bike whose brakes work, a road without too many potholes, and the crunch of leaves under my feet.

Lest we forget: I’m also grateful that the Nissan belonged to an older couple. When I met them along the trail, they were studiously focused on a single bud on a winter tree. They were improvising how to design an optimally dark background for an iPhone photo of the bud. In that great big forest, the object of their awestruck attention was the size of a raisin.

At this time, I am grateful for the ordinary. The everyday.

• • •
Happy Thanksgiving to our Park Piedmont clients and friends. We are grateful for the opportunity to walk alongside you as years go by.

How to Invest According to ESG Principles

Sam Ngooi Life with Money

This week’s Life with Money is our second installment on ESG investing.

Last time we discussed various definitions and reasons why people might opt to invest in this way. One key takeaway was that “sustainable investing” is a general umbrella term, whereas Environmental, Social, and Governance (ESG) investing uses data to measure the sustainability of a company (both financial and in terms of global impact).

Today we cover how to invest according to ESG (environmental/social/governance) principles.

• • •

Originally, sustainable investing focused on including or excluding companies from a portfolio depending on whether they aligned with the investor’s values and interests (think: nixing gun-related assets). The level of customization and detailed analysis required to screen and select companies often meant that sustainable investing funds had higher expenses than traditional funds, and much higher than index funds.

These higher fees, along with the loss of diversification from highlighting or eliminating certain sectors, meant that many of these funds had lower returns compared to their traditional equivalents. Adding insult to injury, “greenwashing” has been an issue, with companies and fund sponsors trying to make their investment funds and strategies appear more impactful and good for the planet than they actually are.

More recently, a few developments are changing the ESG investing landscape. A recent push to standardize how ESG data is measured and compared, including new SEC disclosure requirements for companies, helps address the current lack of universal standards and combat greenwashing. Without standardization, choosing how to sustainably invest is like comparing apples and oranges. How can investors tell if one measurement of ‘diversity’ or ‘clean energy’ is the same as the next?

Second, the increasing popularity of ESG investing has led to more fund options and ways to invest (including within many workplace retirement plans). New developments in regulations, machine learning, and big data have already begun to offer more cost-efficient, effective, and automated ways to apply ESG data to sustainable investment funds.
puzzle
So how does ESG investing work? Here are a few options to consider:

Stocks vs bonds: Whether it’s mutual funds or exchange-traded funds (ETFs), the ESG investing space has long been dominated by stocks. According to the Forum for Sustainable & Responsible Investment (US SIF), about one in four dollars (that’s $12 of $46 trillion in 2018) of total US assets under management are invested using sustainable investment strategies, and (according to Morningstar) ESG bond funds account for less than one-fifth of total ESG fund assets.

Increasingly, there are more sustainable fixed income investment options, particularly as credit rating agencies incorporate more ESG data in their research and ratings to assess risk. As new infrastructure is needed to address global environmental and social issues, the sustainable bond market is expected to continue growing.

Passive vs active: Active sustainable investing involves picking stocks, sectors, or mutual funds that align with investor and/or fund goals. It can involve using ESG data to handpick investments that are predicted to do well or choosing to exercise active ownership through direct engagement (e.g. proxy voting) with companies on ESG topics.

By contrast, passive sustainable investment options often use quantitative ESG data to group investments into indexes that meet a particular sustainability goal and achieve investment results comparable to the segments of the stock market in which they choose to invest. Passive sustainable investing has increased in popularity over the years due to the cost and tax advantages that give them a built-in edge over active sustainable investments. During the last few years, net flows into passive ESG funds have outpaced those into active ones. (The US SIF reports that in 2019, net flows into passive ESG funds totaled $12.7 billion compared to $8.7 billion into active funds).

PPA uses a passive, indexed approach to managing investment portfolios overall, and this extends to helping interested clients invest according to ESG principles.

Broad vs narrow: ESG investing can be as broad as buying all of the stocks that meet certain ESG criteria within a certain area, such as the US stock market or international (both developed and developing country) markets.

Other sustainable funds tout a primary, or “sector,” focus, such as climate change or gender equity, which might appeal to clients with interests in a particular aspect of ESG. Examples of ESG sector funds include SPDR’s Gender Diversity Index (SHE), which seeks out companies that employ women in high-level leadership roles, and New Alternatives Fund (NALFX), an actively-managed fund that focuses on global alternative energy and the environment.

Whatever the scope, investors should look beyond a fund’s name or primary focus to learn about its approach and whether it aligns with their values.

• • •

There is a lot to take in when it comes to ESG investing, but here are some key takeaways:

  • Start by reflecting on your issues: What are your motivations and priorities for sustainable investing? How do they align with your financial goals and needs?
  • Be aware of how sustainable investing is measured, but recognize that the system is imperfect and there are trade-offs.
  • Remember that, as a consumer, there are many other things you can do to live your values in a way that delivers a positive return beyond your portfolio. Perhaps that’s volunteering your time, pursuing philanthropic interests, or choosing to support certain causes through the businesses you frequent or the goods you buy.

Please feel free to reach out to your advisor if you have an interest in or questions about ESG investing.

Pledged Asset Lines: Features and Updates

Nick Levinson Life with Money

Many of PPA’s clients have short-term funding needs. The reasons vary: Some people require infusions of cash between pay checks, including those paid once a month, once a quarter, or only after completed transactions. Others need cash to make a down payment on a new house before their current house is sold. Still others want to finance renovation work on a house without taking on new or additional long-term debt.
check
Lines of credit (LOCs) are a useful tool in these situations. In general, LOCs are a pool of cash available to borrow, secured, or “collateralized”, by an asset. LOCs typically have adjustable interest rates, with payments required only on amounts borrowed at any point in time. Repayment is flexible, with no pre-payment penalties or fees (other than interest) to borrow again. There are also limited situations where the interest paid on an LOC could be deductible (details should be discussed with an accountant).

A common LOC for homeowners is the home equity line of credit (HELOC). These are secured by a home, typically in conjunction with a mortgage. Lenders analyze whether a borrower can afford a HELOC in a process called “underwriting.” This takes time and usually involves expenses in the thousands of dollars depending on the size of the HELOC.

An alternative to a HELOC is a line secured by the value of the assets in a brokerage account (retirement account assets cannot be used as collateral). As many PPA clients know, Schwab refers to these LOCs as Pledged Asset Lines, or PALs. These lines are especially useful for people with financial assets who don’t own homes, or whose homes already have debt levels that won’t allow for a HELOC.

Another advantage of PALs is their relatively low cost: they typically require less underwriting than HELOCs, with no associated closing costs or other expenses. PAL rates include a fixed component that varies based on the amount of collateral securing the line, and a variable component based on a short-term rate such as 30-day LIBOR (London Interbank Offering Rate) or, more recently, SOFR (Secured Overnight Financing Rate).

Through the beginning of 2022, PALs were not only flexible but also inexpensive. Short-term rates like LIBOR and SOFR were close to zero, so the only interest expense was the fixed part of the PAL. As interest rates have risen along with the US Federal Reserve’s efforts to combat inflation, LIBOR and SOFR are now in the high 3% range, making the total annual cost for many PALs between 5-6.5%. This still compares favorably with most longer-term fixed rate mortgages, which have hovered around 7% in recent months. But the adjustable rate on PALs could rise further if short-term rates continue to increase.

In summary, PALs and other LOCs secured by brokerage accounts can be very helpful in managing short-term cash needs. But rising interest rates have made them significantly more expensive than they were just 6-9 months ago. Please feel free to contact your PPA advisor to discuss managing a current PAL or obtaining a new one.

The Stock Market Isn’t the Economy

Nick Levinson Comments, Life with Money

Stock market performance in 2022 has been dismal. Through October 31, the S&P 500, a broad measure of large companies in the US, had declined 19%.

The causes have been diverse: The highest overall inflation in 40 years. Interest rates that have spiked, with the 10-year US Treasury yield rising from 1.5% at the end of 2021 to over 4% currently. High gas prices, caused in part by the ongoing war in Ukraine. Economic and political tensions with China.

Add it all up, and many analysts expect a recession in the US and many, if not all, other parts of the world.

But underneath the headline stock market returns, we’ve seen glimmers of hope in recent months. Prices on the S&P 500 rose about 17% from July through mid-August. After declining by 8% in September, prices gained back 8% in October. (Remember that it takes a larger gain to offset a decline; for example, a 20% drop requires a 25% rise to get back to the starting point.)

What accounts for these mini-recoveries in the context of terrible economic news?
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The short answer is that stock market participants try to look beyond the current economic climate to see what might be happening 6-12 months ahead.

That could be a recession, of course. But in October, it appears that traders were expecting better economic times ahead, and bid the S&P 500, along with other major stock indices, up accordingly.

The optimistic argument in the US appears to involve the Federal Reserve seeing reduced inflation based on the rate increases they’ve already instituted, and in turn starting to reduce, if not stopping altogether, future increases in the short-term interest rates they control. (The Fed has raised rates six times in 2022, including large 0.75% increases in the last five months.)

Lower rates would reduce costs for companies and consumers, and risky investments like stocks would again become more attractive. This is often referred to as a “soft landing” in the media.

Whether it happens or not remains to be seen, of course, but the main point is that the stock market and the underlying economy can diverge at times.

This is one of the primary reasons why PPA recommends that long-term investors (as opposed to traders with short-term perspectives) remain invested in an asset allocation appropriate to their specific circumstances.

Market recoveries can start at any time, even (maybe even especially) when the outlook appears darkest.

A Guide to Holiday Gift-Giving: Making It Merry & Meaningful

Sam Ngooi Life with Money

The holiday season is here! Or rather, major retailers would have you believe it has already been here.

This year, giants like Amazon, Target, and Walmart “moved Black Friday up to early October,” giving shoppers access to “highly anticipated … deals six weeks ahead of Thanksgiving.”

This may be good news for some: the “most wonderful time of the year” has been extended to three months (that’s a quarter of the year, for those keeping track).

But for others, holiday shopping can make the season of giving busy and stressful.

“Being obligated to give, and worrying about how people will react, interferes with the happiness we typically feel at the pure act of giving,” according to Harvard Business School professor Michael Norton.

While nearly 7 in 10 Americans would skip exchanging gifts if their loved ones would agree, we’d like to share a few ways to make holiday giving a bit more merry and meaningful—without saying “bah humbug” to the custom altogether.

• • •
Set Reasonable Expectations

Last year, 36% of Americans incurred holiday debt, averaging $1,249. Rather than worrying about holiday spending after the fact, take time to reflect on your expectations and financial goals.
gift
An early conversation with people in your gift-giving circle can help align expectations around the number of presents, cost, or type of gifts.

Asking, “How do we want to handle gifts this year?” can generate creative gift arrangements, such as pooling money for larger gifts or taking a vacation together.

Shop Thoughtfully
Retailers spend millions to get shoppers to spend more. For example, one-day and limited-time store credit impose pressure on customers to buy things they wouldn’t otherwise.To avoid getting sucked in, recognize sales tactics and stick to a list, then research the best deals.
Give Intentionally

Research shows that gift recipients are more likely to value an experience or activity over material objects, due to the memories and stories generated by the experience (“Remember that time when … ?!”).

A personal note or token gift (think: a pair of hiking socks in advance of a camping trip) can further enhance the excitement and anticipation that make experiences more appreciated than material gifts.

Interestingly, people also feel happier when they receive something they’ve asked for, rather than a surprise. Practical, homemade, or timesaving (i.e., services) gifts are also well-received, provided some careful considerations are made about the recipient’s likes, wants, and needs.

Finally, charitable gifts on someone’s behalf tend to produce the most happiness when they have a well-defined purpose and a way to report back to donors on their impact.

Get Kids Involved

One effective way to reinforce values within families is to discuss the meanings behind holiday traditions and the feelings elicited by giving and receiving gifts.

Ron Lieber, author of The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money, notes that involving kids in the gift-choosing process allows parents to encourage family values, such as matching funds allocated to homemade or philanthropic gifts. In addition, a holiday budget helps kids practice money management.

Savor Gratitude

Expressing gratitude can strengthen positive attitudes in the brain and increase happiness and satisfaction. Throughout the gifting process, it’s okay to enjoy the feeling of making someone you care about feel appreciated.

Similarly, communicating your appreciation for the work that went into a gift spreads the good cheer and strengthens your relationship with the gift-giver.

Focus on Values

Reflecting on values and priorities during the holiday season serves as a reminder of what gift-giving is all about: creating special connections and enriching our relationships through caring, kindness, and empathy towards others.

Taking time—either individually, with friends, or as a family—to think about this deeper meaning can help refocus the reason behind the rituals of the season.

• • •
Wishing you a merry, meaningful, and stress-free holiday season!

What is Sustainable Investing?

Sam Ngooi Life with Money

This week’s Life with Money features PPA advisor Samantha Ngooi exploring sustainable investing. This is a substantial, important, and somewhat complex topic – so our discussion will extend across a few installments of Life with Money.

In today’s part one, we provide broad definitions of various relevant terms and discuss why someone might want to invest this way. In upcoming parts, we will delve further into how the various investments work and what PPA suggests clients might look for in potential sustainable investments.

Enjoy, and please be in touch with follow-up thoughts or questions.

• • •

Sustainable investing takes into consideration a company or investment’s environmental and social impact, often with the goal of positive change for the world and a long-term financial gain for the investor.

With a history dating back centuries, this approach to investing has recently exploded into an alphabet soup of terms and definitions, often used interchangeably. While we use sustainable investing as an umbrella term, here are some definitions to help clarify (recognizing this is just the tip of the iceberg):

  • Socially-Responsible Investing (SRI):  this term has historical roots in investing and divesting according to religious, ethical, or moral values. SRI traditionally focused on divesting from undesirable industries (e.g., guns, alcohol, etc.) but now focuses on investing in a way that expresses values (these may belong to investors, fund managers, or a specific theme).
  • Environmental, Social, and Governance (ESG):  this is a system for measuring the sustainability of a company or investment based on its environmental, social, and governance policies and data. Environmental issues can touch on resource conservation and waste, while social aspects look at a company’s impact on internal and external stakeholders (e.g., workplace safety and ethical supply chains). Governance measures a company’s leadership and accountability to shareholders (e.g., how diverse is the board). The key takeaway is that ESG data is often combined with traditional financial metrics to pick or eliminate certain companies in ESG investment options, such as mutual funds and exchange-traded funds (ETFs).
  • Impact investing: often used to describe private investments in and lending to companies that have the intention to do good.

Other terms you may have heard before are green, ethical, or values-based investing. With so many definitions and not much agreement on how to apply them, it’s important to look more closely at these investments to make sure they really do align with your intentions and values. We’ll address these details in one of our next Life with Money installments.

Who is sustainable investing for and why does it matter?

ESG is one of the fastest growing parts of the financial markets, with an estimated $120 billion invested in sustainable investments in 2021 compared to $51 billion in 2020, which in turn increased tenfold from 2018 and 25-fold from 1995.
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Sustainable investing is considered largely driven by Millennials and Gen Z cohorts (born between 1980-2010) and their beliefs around issues including climate change, sustainability, and social justice. But research suggests that sustainable investing appeals to a wide range of investors with various interests and motivations that extend beyond the desire to make a positive impact.

Incorporating ESG data can provide a more complete view of a company, shedding light on its health and impact beyond its balance sheet. A United Nations report from 2005 called Who Cares Wins summarizes it well:

“In a more globalized, interconnected, and competitive world, the way that environmental, social, and corporate governance issues are managed is a key part of companies’ overall management quality that’s necessary to compete successfully.”

“Companies that perform better with regard to ESG issues can increase shareholder value by, for example, properly managing risks, anticipating regulatory action, or accessing new markets, while at the same time contributing to the sustainable development of the societies in which they operate. Moreover, these issues can have a strong impact on reputation and brands, an increasingly important part of company value.”

This is important for distinguishing the ideological, value-based (and therefore often politicized) motivations for sustainable investing from the desire to understand investment risks and opportunities through an analytical framework.

As mentioned above, in the next few weeks we’ll provide additional details about sustainable investing, including what investments are currently available, as well as some of the limitations of this type of investing and arguments made against the ESG trend.