The Case for Local Investing

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Supporting local businesses is important. Local businesses help create vibrant downtowns, boost tourism, and participate in local charity projects. And when local businesses do well, they tend to spend their money locally, strengthening their communities with more jobs and business.We're all familiar with those "buy local" campaigns. But what about investing locally? What if you could put $75 into that neighborhood coffee shop you like so much and reap the benefits when it does well?This piece from the local business advocacy outfit Small-Mart makes the case for local investing:

Consider two anomalies of the current financial system (even if the latest reforms work exactly as planned). The first is that locally owned, small businesses constitute about one-half of the private economy in terms of output and jobs, but they receive almost no investment from the nation's pension funds or from mutual, hedge, venture, or any other kind of investment funds. In a well-functioning financial system, roughly one-half of the investment should go to roughly one-half of the economy. Today, every American, even stalwart advocates of community development, are overinvesting in the Fortune 500 companies and underinvesting in local businesses key to local vitality.

I'm sold. So why don't we have formal local investing? Part of the problem is that we don't have markets set up for local stocks and there are onerous and expensive legal requirements for businesses that want to take investments. The piece has some suggestions for how we can relax those rules for local, low-risk investments. I'd love to put some money into the successful BBQ place down the street from my house.