America’s investment system is broken. That is how you are introduced by Michael Shuman to the concepts of community reinvestment set forth in his book Local Dollars, Local Sense. It is a call to action to shift our money from Wall Street to Main Street, to not only prosper individually, but to see our own communities thrive.
The argument by many, including myself, to reinvest in ourselves and our communities has been more of an emotional plea up until this point. In previous Reader’s Recommendations, I have been reading and recommending books more about the conceptual and ideological ways to build (or rebuild) our cities. That is all fine and dandy, but the way most Americans, investors, and governments think are in economic terms. “What’s in it for me?” Or, “If downtown is great, why aren’t people investing in it?” This book goes into great rational and factual economic reasons why it makes more sense than ever.
The average American passively invests in his or her retirement account for decades and hopes that come retirement time, they are able to live comfortably in their golden years. If this recent financial crisis has taught us anything, even when things were supposedly “the greatest times in our history,” we have more people ill-equipped for their own retirements than ever.
As the first chapter of Local Dollars, Local Sense highlights:
between 1871 and 2010, stocks listed by the S&P generated an annual rate of return of 2.6%.
This dispels the myth sold around financial advisory tables that you’ll see an average of 8% by investing in “the market.” This might come as a shock to most, but sadly it is the truth.
Most of what we invest into via 401(k)’s, Mutual Funds, etc… can be considered the root of our problems in our local communities. We invest in companies that are large enough to be listed on stock exchanges and more times than not, these are not in your town. Think about this – if you wanted to invest in your local community businesses, you can’t. The SEC and Federal regulators don’t make that possible with all their legal hoopla. So your local small to mid-sized businesses languish because they can’t get the same funding and perks as say our good friends at Walmart. Since the people managing your accounts are looking for big gains and returns you get a portfolio of large conglomerates and an invest market which is highly speculative chasing profits.
It’s a tough predicament we are in right now. And myself, of which I classify as a very entrepreneurial-minded 30-year-old, find it tough to get things started or off the ground. Not because my ideas aren’t good per se, but anything new or small is deemed risky by banks and investors. Thanks Chase, now you aren’t getting a Christmas card from me.
So there has to be an alternative right? YES!!! From co-ops to crowd-funding and even to creating our own community stock exchanges, the author inspires and motivates the reader of the numerous possibilities to reclaiming our own communities while simultaneously receiving modest returns. I won’t go into every minute detail here in this post, but what I can recommend is that you pick up a copy of Local Dollars, Local Sense. Then you can begin not only helping resurrect your local communities, but creating a manageable portfolio of local investments that pays you back at the same time.