While looking to find the right combination of risk and return for your investments, you might also be interested in a third criterion: ethics.
They can require a little more work to find, but there are ethical investments that provide an acceptable rate of return. It’s possible to be a successful investor with a conscience!
The common term used to describe ethical investing is Socially Responsible Investing (SRI).
Adding social responsibility to your investing will reduce the number of investment opportunities you can consider. But there are still many socially responsible companies with solid financials and a bright future.
How to invest with ethical considerations:
- Look at the products and services provided by the company in question. Does the company cause death or disease? What is the impact on the environment? How does the company treat people? How are the products used?
- Many ethical investors avoid tobacco and alcohol companies due to the negative impact these products have on health. Mining, logging, and chemical companies often harm the environment.
- Other types of companies and industries that ethical investors avoid include: gambling, weapons, pornography, and fossil fuels.
- Think about your personal values and determine if the company is in line with them. There are numerous websites and other resources that rate the quality of a company or mutual fund from an ethical perspective. A lot of information is also available for evaluating the “greenness” of investments.
- Socially responsible investing is increasing in popularity. Look for companies that are helping people or the environment.
2. When looking at mutual funds and retirement funds, take a look at the investments these funds make. While a fund might have an altruistic name, it might just be a marketing ploy. Do your homework. There are many mutual funds designed with the ethical investor in mind.
3. Eliminate current investments that violate your ethical concerns. If you’re going to invest in a socially responsible manner, think about removing any investments you currently have that don’t meet your new criteria.
- An alternative is to attempt to influence the company or mutual fund to change their activities. Retirement funds have been known to redistribute their portfolio due to pressure from the shareholders. Maybe you can do the same.
4. Make a list of the issues that are most important to you. You probably have a few causes that are near and dear to your heart. Are you concerned with water pollution? Destruction of the rain forests? Search for companies that combat the challenges that are most meaningful to you.
- Be sure to include companies that are also preventing issues. For instance, a company that makes solar power panels is helping the environment indirectly. A company that makes batteries for electric cars is doing the same.
5. Keep your profits in mind. There are many investments that might be great from an ethical standpoint, but horrible from a financial standpoint. Just because a company is benefiting the world doesn’t mean you can’t lose your shirt. Search for ethical investments that are also financially sound.
Socially responsible investing seeks to combine successful investing without causing harm. You can vote with your dollars by investing in companies that avoid adding to the world’s challenges.
You can also go a step further and seek out companies that help the world. It’s not necessary to support companies engaged in activities that violate your ethics.
Examine your portfolio today from an ethical perspective, while keeping an eye out for the profits you seek.
You’ll feel greater satisfaction when you know you’re building a secure future for both you and the generations to come.