Ethical Investing and Why it Matters

A snapshot look at how to get started putting your money where your vote is. Photo Credit: Corduroy Graphics

The word investing probably invokes a lot of feelings in you. Maybe you’re a Wall Street Bro that hears it and wants to dive straight into talking about day trading. Or maybe you want to hide under your bed and forget about the fact that you haven’t even contributed to your 401K, or even fully understand what it is. 

Yeah, I get that

Investing can be a daunting task. From mutual funds and IRAs to stocks and cryptocurrency, there are a lot of options. And when you combine that with the fact that many of these support companies you’re adamantly against, it can feel like a lost cause. 

Whether you like it or not, investing is one of the quickest and easiest ways to help you reach your financial goals. With an average return of 10%, you have the ability to grow your money significantly, save for the future, and prove the Boomers wrong. But is there a way to invest while also supporting better corporations?

Yes, indeed. And here’s how to do it. *Note: I am in no way a financial adviser and I don’t even play one on TV. Take everything below as general fun advice from your chatty neighbor, not words to live by.*

Socially Responsible Investing (SRI), is an umbrella term that generally means any investment that supports businesses with more responsible business practices. This can mean investments in green tech companies, companies against animal cruelty, or fair trade companies that actually pay a living wage, amongst other things. It also can mean actively not investing in shitty companies that do harm (gas and oil, tobacco, guns). 

SRI investment is a great option for people that want to build their own wealth while also supporting good companies. Many of these companies need stockholders to help grow their organizations into successful businesses. This is one way we truly can vote with our dollars. By putting our money into causes we care about, we are working for the future for all of us. 

You might be thinking, “cool, that sounds great, but how do I do that?” 

Glad you asked. While there are tons of ways to invest and each one has risks and benefits, I’m going to be focusing on two types of socially responsible investments that you can easily get started in with very little money. These investment types aren’t for anything specific (like retirement) but can be used to grow your wealth for whatever future plans you might have (like a house or maybe some avocado toast). 

Index Funds

Index funds are portfolios of stock options that are bundled together for a less volatile investment that generally match the return of the stock market. Often consisting of small shares from many companies, these funds are professionally managed by brokers, either real people or Robo Advisors. By analyzing the data, they sell or trade shares that are performing poorly, while buying shares that are performing well, so the funds stay steady. 

Unlike stocks, which I’ll talk about below, index funds are a hands-off approach to investing. Simply find the funds you want to invest in and leave it there (the longer, the better). This makes it a great option for millennials because we all have better things (i.e. NetFlix) to do with our time than fret over the stock market. 

SRI index funds are made up of a mix of different companies. Some SRI funds focus specifically on renewal energy, some focus on gender equality, and some focus on keeping money away from tobacco and gun companies. While you can find most of the top SRI funds in most traditional investment companies such as Vanguard or Fidelity, you could also invest directly with a better management group. 

Some of those include Ellevest, Betterment, or OpenInvest. I personally use Ellevest and love that it’s run by women for women. Not only can I choose my financial goals and the funds I want to support, but I also get a weekly newsletter designed to educate me more about personal finance. 

Index funds are a good beginner investment tool. Once you get started, you don’t have to think much about it. It’s like the Uber Eats of investing. Spend some time upfront deciding what you want, then sit back and wait for the benefits to arrive. 

Stocks

Stocks are shares of individual companies that you can buy directly. Stocks are the riskier of the two investment types because they rely solely on one company. If that company fails, your money is lost. In the same vein, if that company turns out to be the next Big Thing, you’re set for life. 

Apps like Robinhood and eToro help newbie investors learn the stock market ropes. By doing some research, you can buy stocks in companies you truly believe in. Some of those would include BEP or PBW, two companies that focus on renewable energy. Stocks are always risky, but by buying shares, you’re showing a brand that ethical business matters to you. 

While index funds are like the Uber Eats of investing, stocks are like cooking yourself a big meal. It might be more satisfying in the long run, but it takes a lot of prep and continual care to get to the end. Personally, for me, it’s not worth the hassle, but many people get great joy out of it. If you like managing your portfolio and having full control, this might be the way to go. 

At the end of the day, investing is hard work, but it can lead to great rewards. And by focusing on SRIs, it can be great not only for your wallet, but for the world around you. 

If you’re new to investing, there are a lot of options, each with their own risks and benefits. While you could write books on the subjects (as many people have), we don’t have time for that, we have to get back to ‘killing’ breakfast cereals and casual dining. 

Inside, check out some of these resources to learn not just about investing, but about all money matters:

She Spends

The Balance

Nerd Wallet

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