As a growing number of people become aware of the impact their investments can have on world events, demand for ethically-sourced products has skyrocketed.
The ethical investment market has grown exponentially in recent years, and it’s not just limited to traditional assets like stocks, bonds and property. Ethical financial products are now available in practically every niche imaginable, with almost every type of investor able to develop an ethical investment portfolio that meets their personal values.
An ethical investment portfolio is one that has been constructed with an eye to aligning your financial interests with your personal values.
This post will serve as a step by step manual for anyone who is interested in creating an ethically-aware portfolio without the help of a financial advisor.
Step One: Decide What Is Most Important To You
The first step in creating an ethically responsible portfolio is to decide what your personal values are, and how you want to incorporate them into your investment strategy.
The easiest way to do this is to make a list of your core values, and then think about how an investment portfolio that reflects these values can positively impact your life in the future. You may want to focus on financial values, such as maximizing your investment return or reducing your risk of losing money.
Alternatively, you may want to focus on social or environmental values, such as supporting companies that treat their employees fairly or reduce the company’s carbon footprint.
Step Two: Find Companies with Ethically-Sourced Products
One of the easiest ways to screen for companies with ethically sourced products is to find those with a positive social or environmental impact.
One way to do this is to use a website like Ethiscore or GoodInvestor. These websites provide a wide range of metrics for companies, including their positive social or environmental impact, employee satisfaction, and the company’s financial strength.
Once you have identified a shortlist of ethically-minded companies, you can dig deeper into the financials of each firm and track their progress over time.
Step Three: Select a Broker and Determine Your Investment Strategy
There are many different brokers that offer ethically-minded investors a wide range of different products. Once you have decided on the metrics that are most important to you, it’s time to select a broker.
You can find a list of brokerages that specialize in socially conscious or ethically-minded investing here. Once you have selected a broker, they will proceed to create a tailored investment strategy for you that best fits your risk tolerance level and goals.
Step Four: Create a Portfolio With Investments You Are Confident In
Once you have selected an investment strategy, it’s time to put your ethically-minded portfolio together.
The first thing you will need to do is decide how much money you want to invest. However, note that ethical investments are just like any other investment, and you could lose money. The best way to protect yourself from the risk of losing money is to diversify your investment portfolio. Diversifying your ethically-minded portfolio means that you are investing in a wide range of companies in different industries.
You can also stick with companies that have a competitive advantage. This means that the company has something that makes it stand out from its competitors, such as a unique product or service.
The most important thing to remember when constructing an ethically-minded investment portfolio is to be patient. You may be tempted to sell your ethically-minded investments if they aren’t performing well but try to be patient.
Yes, you may not see the same short-term profits as your non-ethical counterparts but these investments are almost always better for the long-term health of our economy. And as the economy grows, so do ethically-minded investments.