Ethical investing is a trend that has been on the rise in recent years. And for good reason. The world is changing, and so must your investment strategy. More and more people are becoming concerned about the environment and want their portfolios to reflect their values.
“Nobody’s perfect” is a phrase often used when describing ethical investing. But, if you’re thinking this means you can’t be an ethical investor, think again! It’s indeed hard to do all the things in the world that you want to achieve. Even harder is trying to juggle family and work obligations AND build an investment portfolio that aligns with your values. But that doesn’t mean you can’t do it!
What is Ethical Investing?
Ethical investing is a method of investing that seeks to apply ethical standards to investment practices. This means that investors consider the impact of their investments on society and the environment when making investment decisions.
The upshot of ethical investments is to align financial returns with social good. Some examples of investments that fall into this category include mutual funds, bonds, ETFs, and index funds.
How to Navigate the Ethical Investing World
Step #1: Define your Values
After defining what you want to invest in next, you want to ensure your ethical investments align with your values. The Golden Rule in these situations is “do unto others as you would have them do unto you.”
So that means you don’t want to invest in things you wouldn’t want to be invested in yourself. You also don’t want to invest in things you would not feel comfortable purchasing for your own use. After all, the purpose of investing is to make more money in the long run.
Step #2: Quantify the ethical impact of your investment
If it is possible, use the social impact calculators that are available online to figure out whether or not the investment in question meets your ethical standards. There are also plenty of third-party agencies that evaluate companies for their sustainability efforts and provide ratings accordingly.
Step #3: Look for sustainable investments
Select an ethical investment vehicle that allows you to invest the way you want. Some people prefer a mutual fund or ETF because they have the advantage of diversification. Others would rather invest in individual stocks to keep a close eye on everything happening with their portfolio.
Also keep in mind how you want to invest the money you’ve set aside for this investment. Are you planning on using these funds for retirement, or will you use them for something else?
Younger investors typically invest in stocks because they grow more than bonds but are riskier than cash and other types of securities, such as mutual funds and ETFs.
Before you settle on an ethical investment option, you’ll have done a lot of research. This can be a daunting challenge, especially when you’re just getting started. It can also cause tedium and eat up most of your time. Your best option is to join a pool of like-minded ethical investors and learn from the best!