I was inspired by the concept, if not the execution, of Dividends4Life’s recent Seeking Alpha article detailing three stocks for infinity. Without arguing the merits of the actual picks, suffice it to say I tackle the issue from a different angle. Firstly, there are no “stocks for infinity”. All investments have a timeline depending on the individual investor’s personal situation. Secondly, selecting companies that are unable (or unwilling) to practice sustainable business practices in part or whole are destined for inevitable failure.

While I titled this article five sustainable investments everyone should have, I consider them five indispensable investments for the long term investor to consider, sustainable or not. While I don’t generally advise individual stock picking (unless you like the thrill of the gamble), here’s what everyone should have:

For those of you that have been reading the Smug Investments blog, Smugly Green, you will be familiar with our green portfolios. If you’re reading Seeking Alpha, check out these links as they lay down the foundations to our thinking: Beginner’s Guide to Green Investing, Green Commodities for a Complete Green Portfolio, and Green Investing and Risk Management. True to form, I wanted to go over some simple quantitative ways to reduce overall volatility in your green portfolio. It will also illustrate the point that, if you expanding your notion of green as mentioned in the Green Commodities article, there’s no reason a bigger piece of your overall investments, if not the whole thing (as is my case), can’t be green, responsible, and sustainable.

My father-in-law just sent me an excellent op-ed piece written by Peter L. Bernstein in the New York Times (Sunday, June 22nd paper) that got me thinking about risk. I've talked a bit about risk in creating your portfolio, and I've beaten to death already the fact that I am risk averse, but I think given current market conditions, it's not a bad idea to rehash the concept.

First and foremost, it's important to define what risk is exactly. Despite there being hundreds, if not thousands, of measures of volatility, the article points out that the market tends to muddle the definitions of risk and volatility. In short, volatility is NOT risk. Risk is the likelihood that something will happen (anything, really). Volatility in financial markets is usually a reaction to the perception that something will happen (just about anything). When working to manage risk, it's a twofold process: 1) you need to treat the symptom (volatility), and 2) understand "the consequences of being wrong" [Bernstein].

For those of you that have been reading the Smug Investments blog, Smugly Green, you will be familiar with our total green portfolio concept. For non readers, the ever expanding universe of green, light green, and responsible ETFs are making it possible to start thinking out of the box when creating your green portfolio. In order to do it right and be properly diversified, the notion of green may have to be stretched, but it's well worth the effort to create a more fully sustainable investment portfolio that doesn't necessarily sacrifice performance.

The obvious start to any green portfolio is the green energy options, some of which I laid out in my Beginner's Guide to Green Investing on Seeking Alpha. However, green energy is just a piece of the overall puzzle, albeit it an important one. The best way to start expanding the notion of a total green portfolio is to redefine asset allocation categories - instead of Small Cap, Mid Cap, Large Cap, and Bonds, Smug Investments' allocation classes look like this:

I find there are two ways to green your business, or your life in general: internally and externally. Effecting internal change like using solar panels, recycling, or re-scrapping that memo from Jackson down the hall that reminds you to use a cover on your TPS report. Internally, you have all the control, and all the expense. It is the micro way to effect change - and it works when everyone does little things with you.

The external way to be green is one very few people know or feel comfortable with: investing green. For the hardcore DIYers, this may mean individual stocks. In my opinion, buying an individual stock is like playing roulette - you almost always lose, and it's totally addicting. As I have enough vices, I avoid stock picking in general, but if you're into it, here's a good place to start. Spreading your risk amongst a combination of ETFs (exchange traded funds) and mutual funds is a perfect way to promote green and sustainable business, and even (maybe) make some green yourself.