The world of ethical investing can be a minefield for the uninitiated. With so many options out there, it’s never been more important to do your research before getting involved with any new financial products.
Ethical investing essentially involves putting your money where your values are – by only investing in companies that meet your ethical standards. This practice has grown in popularity among millennials and Generation Z as well as Boomers who are reaching retirement age and want to use their investments to support causes they believe in.
In this article, we’ll explain everything you need to know about ethical investment ETFs before making your first purchase.
What Is An ETF?
An ETF is short for exchange-traded funds and is a type of fund that owns a selection of different assets such as stocks, bonds, commodities, or other types of investment. You can buy ETFs just like you would buy stocks, but they tend to be cheaper and easier to access for the average investor.
What Constitutes Ethical Investing?
Ethical investing is when an investor only chooses to put their money into companies that meet their ethical values. Ethical investors use their finances as a way to express what they believe in and fight for social change.
A common misconception is that ethical investing only applies to companies that produce social or environmentally-friendly products. While it is true that many ethical investors choose to invest only in companies that produce renewable energy or organic produce, that isn’t always the case.
In reality, anything that is relevant to your personal values could be considered “ethical”. For example, an investor who strongly opposes guns could choose to only invest in companies that have no ties to firearms.
How to Find Ethical ETFs
Working with a broker is a good way to narrow down an ethical ETF that ticks all your boxes. Investment brokers have the right experience and expertise to help you find a viable ethical ETF for your needs.
There are also plenty of websites that specialize in tracking and rating ethical ETFs. This makes it easier than ever to avoid companies that you don’t agree with and find those that have your best interests at heart.
You can also find ethical investment ETFs through positive screening. With positive screening, investors choose to only invest in companies that meet certain requirements. To give you an idea of what this might look like in practice, an investor with a strong belief in climate change might only choose to invest in green energy companies.
Benefits of Investing Ethically
Increased Returns
One of the most obvious benefits of ethical investing is higher returns. Ethical companies are often less risky than their non-ethical counterparts, and this could significantly boost your investment returns if you choose wisely.
Less Volatility
Ethical investing could also lead to lower volatility in your portfolio. This means that your money is less likely to suffer from dramatic fluctuations in value which could reduce the chance of you losing all of your money in a market crash.
Support Important Causes
Ethical investing isn’t just good for your financial future – it’s also great for the future of our planet. You can use it to support causes that you care about.
This will also give you much-needed peace of mind. You can rest easy knowing that your money is coming from a place you can be proud of.
In Conclusion
Investing ethically is a great way to make a positive impact on the world and improve your finances at the same time. When you invest ethically, you’re putting your money towards companies that have your best interests at heart.
These companies are often more socially responsible, produce environmentally-friendly products, and treat their employees better than their non-ethical counterparts. This could lead to better returns on your investment, lower volatility, and a reduction in risk. So, what are you waiting for? It’s never been easier to invest ethically. Let this article be your guide and get started with ethical investment ETFs today.
