Locavesting: the revolution in local investing and how to profit from it

How individuals and communities can profit from local investing
In the wake of the financial crisis, investors are faced with a stark choice: entrust their hard-earned dollars to the Wall Street casino, or settle for anemic interest rates on savings, bonds, and CDs. Meanwhile, small businesses are being starved for the credit and capital they need to grow. There's got to be a better way.
In Locavesting: The Revolution in Local Investing and How to Profit from It, Amy Cortese takes us inside the local investing movement, where solutions to some of the nation's most pressing problems are taking shape. The idea is that, by investing in local businesses, rather than faceless conglomerates, investors can earn profits while building healthy, self-reliant communities. Introduces you to the ideas and pioneers behind the local investing movement Profiles the people and communities who are putting their money to work in their own backyards and taking control of their destinies Explores innovative investment strategies, from community capital and crowdfunding to local stock exchanges
With confidence in Wall Street and the government badly shaken, Americans are looking for alternatives. Local investing offers a way to rebuild our nest eggs, communities, and, just perhaps, our country.

Q&A with Author Amy Cortese
Author Amy Cortese What is locavesting?
Locavesting is a term I came up with to describe the emerging local investing movement. Most of us are familiar with the term locavore, which refers to the growing number of people that try to eat a diet sourced within a 100-mile or so radius. Locavestors are people who want to invest that way. The idea is that you can earn a profit while supporting your community.

Why should we invest locally?
From an economic perspective, small businesses – which, by definition are mostly locally owned – create more than two out of every three jobs. They also benefit their communities in ways that big corporations do not. Studies have shown that a dollar spent at a locally owned business generates three times more direct economic benefits to the community, measured in wages and local spending, than a dollar spent at a corporate-owned chain. And that gets to an important point. So many of our iconic corporations are no longer connected to any place at all, they are global, they produce in overseas factories, and they employ more people outside the U.S. than within. Local business owners, in contrast, have a stake in their communities – they live there, after all – so they make decisions in a different way than a corporation that is solely interested in maximizing profit.

From an investment perspective, local businesses can be quite successful. They’re not just mom and pops; they can be established, growing multi-million dollar enterprises. I would also argue that their proximity and familiarity makes them a less risky investment than, say, sinking money into a company halfway around the world whose business you don’t understand, or investing in a seemingly safe company like AIG or Lehman Brothers or BP. That said, no one is suggesting that everyone go out and invest all of their money in the local hardware store. But local businesses can be part of a smart diversification strategy. And here’s why it’s important. These firms – the ones that create jobs and contribute to a vibrant local economy – need capital to grow like any business. But they’ve been largely abandoned by Wall Street and traditional funding sources. Think about what life would be like without these businesses.

So why aren’t more people investing locally?
Well, it’s actually not that easy to do. Our securities laws, which were crafted nearly 80 years ago, make it very difficult for investors who are not super wealthy to put money into private businesses, and for those businesses to reach out to their communities. It’s easier for most people to invest in a company half way around the world than one in their own backyard. And that’s a shame