Developing a rewarding investment strategy is challenging on the best of days, and factoring in ethical investing rules can make it even more difficult to turn a profit. An ethical investing strategy involves choosing investments while factoring in a personal moral code. The result is putting money into businesses and industries that positively influence ideas and purposes that are important to you.
The definition of an ethical organization varies by person, so a strategy that works for one person might not be agreeable to another. Therefore, you’ll have to develop a personalized investment plan to ensure that the companies you’re supporting align with your worldview.
This guide will walk you through the process of finding ethical investments and earning a return without compromising your beliefs.
Aspects to Consider When Investing
Your ethical investment code depends on what matters to you. While most ethical companies are attempting to make a difference in the world, how they go about it varies. Some ideas to keep in mind when choosing investments include:
Investing in sustainable companies means finding organizations that focus on renewable resources. These businesses might also reuse or recycle products to lessen the burden on the planet’s natural resources. Sustainable companies are growing in volume as more people become aware of their benefits.
Organizations that focus on social responsibility include fair-trade companies that pay their employees a livable wage and minority- or female-owned businesses. When getting involved with socially responsible investing, or SRI, you might focus on a social issue that’s important to you and invest in a company that supports those beliefs.
In many ways, green investing is similar to sustainable investing because it focuses on environmental concerns. Examples of green businesses include organizations that create energy-efficient products, clean fuels, and low-carbon transportation infrastructure.
When selecting companies to invest in, some people will look at their management and whether it aligns with their morals. Aspects of corporate governance to consider include whether executives make a reasonable wage rather than excessive pay, the diversity on the company’s board of directors, and if the organization is responsive to shareholders.
All of these ethical investing considerations fall into the environmental, social, and governance (ESG) investment category. ESG investing is becoming more common as investors not only appreciate having a more ethical portfolio, but are also finding that some of these companies offer significant returns and less risk.
5 Tips for Creating an Ethical Investing Portfolio
There’s a lot to navigate when building an ethical investing portfolio. Breaking the process down into a few steps can make it more manageable and, hopefully, enable you to select investments that do well while also doing good.
1. Figure Out What’s Ethical to You
You’ll want to start by determining what type of company you find reputable. This decision varies by person, so begin by developing a list of ethical issues you’re looking to support, as well as some deal-breakers. Knowing what you’re looking for allows you to quickly eliminate potential investments that don’t meet your moral requirements.
2. Consider Whether You Should Build Your Own Portfolio
Next is figuring out if you want to manage your portfolio yourself. The advantage of doing so is that you can select the exact investments you want to make, with the drawback being the time commitment. It’ll also take some time to learn how the market works if you’ve never invested before, and you might find that you don’t get the returns that a professional can deliver.
3. Look at Managed Portfolios
The other option is to go with a managed portfolio, which means an investment manager takes care of the entire process for you. This option is great if you don’t have the time or know-how to deal with your own investments but want to maintain some control over where your money goes. Robo-advisors are becoming increasingly helpful too, but keep in mind that they won’t allow you to add specific investments to your portfolio.
4. Research Individual Stocks
For those who have decided to build an ethical portfolio themselves, the next step is researching companies that meet their moral investing goals. Start by searching for traded companies and then do some in-depth research on the organization to ensure it matches your morals. You’ll want a diversified portfolio that covers multiple industries, so keep digging until you’re satisfied with your volume.
5. Explore Ethical Mutual Funds
An easier way to invest in ethical companies is through mutual funds. There is an increasing number of mutual funds that focus on ethical investing, with the idea being that the fund will invest in multiple companies that meet specific standards. Much like using a robo-advisor, however, you won’t have any input on the stocks the mutual fund purchases with your money.
How much time you can spend researching these companies, and the market in general, will likely dictate the direction you take. The good news is that ethical investing is a growing trend, so you’ll have lots of company as you make this transition.
Consult With an Ethical-Investing Expert
The experts at Bogart Wealth eliminate many of the challenges of ethical investing by enabling you to provide specific investment parameters while having a stock market expert handle the hard work and research for you. The result is a portfolio that can help you meet your unique financial goals without sacrificing your morals.
Contact Bogart Wealth to speak with an expert about your ethical investing concerns or learn more about our investment and wealth management services.