Do you want your investment decisions to have a positive impact? Do you find it difficult to concern yourself with whats happening in distant countries when you see plenty of problems that need solving in your own neighborhood? If so, community investing might be the solution. In this article, well explain how this type of socially responsible investing works and how to make it work for you.

What Is Community Investing?

Community investing (CI) is a subcategory of socially responsible investing, and it aims to earn returns for investors while contributing to noble causes. Specifically, CI puts investment dollars to work locally to provide safe and affordable housing and job opportunities, provide education, healthcare, financial counseling, child care and other essential community services. It also improves your own community or a nearby one, or whatever community you choose to invest in. CI also facilitates investment in underserved communities more broadly if there isnt a specific community you want to focus on.

Institutions that provide community investing opportunities help finance people and businesses that otherwise couldnt get it, and in the long-term allows people to help themselves.

According to the Forum for Sustainable and Responsible Investment, community investing is one of the many fast-growing facets of socially responsible investing.

How to Invest

Since community investing encompasses a broad range of activities, there are many options for pursuing a community investment strategy.

For starters, instead of choosing one of the usual options for your checking and savings accounts, you could keep your money at a community development bank that lends to individuals and businesses that otherwise couldnt get a loan. Like traditional banks, community development banks are FDIC insured but unlike traditional banks, they focus on serving a low- to moderate-income clientele. You can find banks that the U.S. Treasury Department has certified as dedicating 60% or more of their services to low-income communities at the Community Development Financial Institution website.

Investing in agency bonds is another form of community investing. The term agency bonds encompasses both government agencies like Ginnie Mae and government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. These entities help provide housing to people who otherwise couldnt afford it.

GSE bonds, which help fund Fannie Mae and Freddie Mac, are not government bonds, so they are not backed by the full faith and credit of the U.S. government like Treasury bonds are. These GSEs are shareholder-owned corporations, and you should research them and evaluate their credit risk as you would other corporate bonds. Agency and GSE bonds have inflation risk, like all bonds, and some have call risk. However, they have relatively low credit risk. Youll earn slightly better returns with these bonds than with Treasuries because of the additional risk, but unlike Treasuries, the interest is not tax deductible.

Ginnie Mae is a government agency, and investments in the agencys securities do carry the government guarantee and theoretically dont have any default risk. If you want to invest in Ginnie Mae, you wont be investing in bonds; however, youll actually be investing in mortgage-backed securities, which in light of the 2008 financial crisis, should be approached with some trepidation and a careful eye.

To invest in these entities, you can purchase their securities through a brokerage. Youll need $10,000 to $25,000 to start investing in agency bonds.

Other options for community investing include the following:

• Buy real estate in poor communities to help provide affordable housing for low-income tenants and to revitalize neglected neighborhoods.