Local Investing (building wealth on your doorstep)
Locavesting is a merge of the two words ‘local and investing’, which means rather than invest on the stock market, entrepreneurs and investors pool money into local areas. This can be investing in local councils but more often is in the business world. Some examples would be to invest in:
- Locally-owned grocery stores
- Fair trade vegan restaurants
- Independent shops and bakeries
This not only will likely give you back your investment. But if it doesn’t (and all investment has risk), you’ve likely made the area you live in nicer anyway, for you and everyone around you.
It also keeps money within communities, rather than in the pockets of distant shareholders, who are likely destroying the planet.
What counts as local investing?
Local investing means your money goes to assets and enterprises near you, and you can point to what it supports. You’re backing a street, a service, and a set of people. Index funds aim for broad market returns with high diversification. They can suit a core portfolio.
Local investing has a different purpose and different trade-offs. You may get less liquidity, fewer buyers, and less price transparency. In return, you may gain access to opportunities you understand better, plus benefits your neighbours can feel.
Common ways to invest locally
- Local shares via crowdfunding platforms: You buy shares in a small business. Returns can be strong, but failure rates are high and shares can be hard to sell.
- Community shares: Co-ops, community pubs, local shops, and energy projects may offer community shares. They often prioritise steady benefits over big wins.
- Buying or improving local property: From a spare room to a renovation, property can produce income. Consider the ethics, because homes are not just assets.
- Credit Unions are also a good way to invest in communities. These member-owned banks lend your money to local people are affordable rates, only if they have a history of saving, to avoid debt. They can be used for home improvements to small business, instead of money going to global banks.
How local investing can strengthen communities
When local firms grow, they tend to hire from nearby. Wages then get spent nearby, so other businesses see more trade. Suppliers get repeat orders, so they take on staff. High streets stay active, so the place feels safer and better kept.
You also gain a practical edge. You can visit the site, talk to customers, and see demand with your own eyes. Still, proximity doesn’t cancel risk. A beloved shop can be badly run. A housing project can hit delays. A solar co-op can misjudge costs.
Investing locally without taking silly risks
- First, build an emergency fund that matches your household risk, often three to six months of essential spending. Next, clear expensive debt, because high interest can wipe out investment gains.
- Then define “local” in a way you can stick to. For some, it’s the same town. For others, it’s within 20 to 50 km, or within the wider region. The point is to be consistent.
- Choose a time frame too. A three-year horizon suits some loans. A five to ten-year horizon suits most equity and property projects. If you might need the money soon, don’t lock it up.
- Finally, cap your exposure. Many people start with 1 to 5 percent of investable money in local deals, then grow from there after learning what can go wrong.
Do quick due diligence in plain English
You don’t need to be an accountant to ask decent questions. You do need to be steady and a bit sceptical.
- Know the payback: Is it dividends, interest, rent, or a rise in share value?
- Check fees and tax: Look for platform fees, legal costs, and likely tax treatment.
- Read the risks section: Don’t skim it. If it’s vague, treat that as a warning.
- Look at cash flow: How does money come in each month, and what must be paid out?
- See who else is investing: A mix of backers can be healthier than one dominant funder.
- Check governance: Who makes decisions, and what rights do investors have?
Watch for red flags: guaranteed returns, pressure to act fast, unclear use of funds, missing accounts when they should exist, and heavy dependence on one customer or one supplier.
If friends are involved, protect the relationship. Use written agreements. Don’t invest money you’ll need within a year or two.
A Few Inspiring Case Studies
- Community Wealth Builders is based in Baltimore, USA. It helps local businesses with crowdfunded, no-interest loans to succeed in an area that suffers from high unemployment.
- The Handmade Bakery (Yorkshire) is thriving, thanks to now-paid-off ‘bread bonds’. Instead of receiving money, investors received good bread in return! Today, it bakes thousands of loaves a week, supporting the local economy.
- Spacehive is a community fundraising site. These are ‘pots of money’ that can be raised for local shops and projects.
Michael H Shuman is the author of the wonderful book Put Your Money Where Your Life Is. He says the issue is that millions of people with savings are limited to putting them into big companies and global corporations. He believes that in the future, these funds will instead be invested in local funds to build affordable housing (not destroying the countryside to do it), food and clean energy funds.
Abundance Investment (investing in local councils)
Abundance Investment is a great idea. Rather than invest in the stock market, you fund your local council, to invest in your area. It’s also safer (to date, no council has ever failed to pay back the money, as a council rarely goes bust, and won’t run off with your money to buy yachts in the Caribbean).
Most are using your money (over 5 years) to tackle climate change and reduce carbon emissions. This is through initiatives like planting more trees and investing in green energy and better public transport.
As with any investment there are risks. But this company adheres to all the proper rules, and it’s kind of like ‘crowdfunding for your council’, where a survey found that 73% of savers and investors would be interested in lending money to councils, if it helped with environmental and social benefits. Especially as the average group of 100,000 people in the UK holds £4 billion in savings.
So instead of cash-strapped councils asking government for help (that often says no due to lack of funds), this is kind of do-it-yourself-improve-your-community instead. Locals lend the money (and get back something in return in the form of interest and also better communities).
You can invest from £5 (and can also choose to donate interest back to community projects). This is a fantastic idea, why is this not more widely-known? So far, just four councils are involved.
- Hounslow Council – community energy, grants to local community projects and places of worship, upgrading air, energy and transport for schools, cycle paths, reuse and repair events, transform unused land to grow local free food.
- Hammersmith & Fulham Council – Rain gardens to protect against floods, ‘greening the grey’ schemes), and secure bike storage.
- Greenwich Council – more LED wildlife-friendly public lighting, solar panels, improving public parks and greener public buildings.
- Southwark Council – creating more cycle spaces, transition lampposts and parks to LED lighting, run pools and gyms on green energy, replace boilers with heat pumps at a local school, expanding a local tool library, nature projects for local green spaces and cemeteries and again installing rain gardens, to prevent floods.
You can also choose to invest in community energy, like solar panels on schools. These cannot only reduce carbon emissions and power a school, but leftover energy can be sold to the national grid. This means investments to improve schools and communities (and possibly helping to pay bills for local people in fuel poverty). It’s all rather exciting stuff!
