Your Investments

Even with the wave of hope that the presidential campaign has fostered, we still can't ignore what's going on: Credit crisis. Bank failure. Financial meltdown. The news from Wall Street has been utterly bleak for months now, leaving a lot of people to wonder whether their money is safer in the mattress in their bedroom, or in the one in the guest room. The truth is, most people can't avoid the stock market – to have enough money to retire, we need the higher returns that stocks have earned over long periods of time. But it can be easier to ride out these roller-coaster periods if you're investing in companies that are committed to a greener future. After all, if you want your food to be free of pesticides, why would you own stock in the company that makes the chemicals? Thanks to a growing number of green mutual funds – stock portfolios that invest in environmentally-conscious companies – you can invest for your own golden years and for a healthier planet at the same time.

Finding a Fund

Everyone has a favorite eco-friendly company, but buying individual stocks is the financial equivalent of putting all your eggs in one basket — way too risky. So mutual funds, which are baskets of stocks, are usually a better choice. There are 34 funds that narrowly focus on environmental issues like climate change and alternative energy, and more than 100 funds in the "socially responsible," or SRI, category, which includes funds that would take into consideration a company's environmental impact, regardless of what the company makes. There's a comprehensive list of both at SocialFunds.com . No two funds apply the same standards, so it's important to visit a fund's website and make sure you understand its methodology. (It's not always the most gripping reading, but fund managers should be able to explain their philosophy in clear, understandable English.)

Shades of Green

Experts and investors argue about what, exactly, constitutes a "green" fund. For the three dozen narrowly focused green funds, it means they target environmentally proactive companies, investing in wind turbine manufacturers and ethanol companies. That's what's known as a "pure play" investment. And while it may sound like a gold mine, now that everyone's focused on energy independence, for most investors, it's way too risky: These companies are often small and dealing with untested technology in a field that's rapidly changing. It's all right for Google , but not for everyone. With a big hit, they could strike it rich, but there's plenty of potential for big losses – several alternative energy funds lost almost half their value in the third quarter of 2008 alone. There's a better alternative: There are plenty of green funds that take a lower-risk approach, by owning stock in all kinds of companies as long as they meet certain environmental and sustainability standards. They're a more stable bet for most eco-conscious investors, says Patricia Farrar-Rivas, a managing partner at Veris Wealth Partners. "That's basic – you have to be diversified," she says. "Otherwise, it's just too risky."

The Business Argument

Investing in green companies isn't just about making a personal statement. The earth has finite resources, says Leslie Christian, who runs a green fund called Portfolio 21 : "For a company to flourish in the future, it has to take those limits into account." In other words, companies that are already preparing for a world in which oil grows increasingly scarce, or carbon emissions are capped, are in a better position to survive and profit in the long run, just as Toyota's early embrace of hybrid technology left the competition in the dust. And in the short run, there's no penalty for leaving, say, a seemingly lucrative but environmentally questionable stock like Exxon-Mobil's out of your investments: According to several studies (a broad swath can be found on SocialInvest.org , socially responsible funds, as a group, perform just as well as funds that are strictly agnostic on social issues.