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What Is Socially Responsible Investing?

Do you know what socially responsible investing means? Socially responsible investing is a term used to describe investing in companies that conduct their business in morally and ethically appropriate ways. Conversely, it means to avoid investing in companies that do business in products or services considered offensive, environmentally dangerous or morally inappropriate.

Socially responsible investing depends on the investor's own values to some degree. Tobacco companies are often avoided in socially responsible portfolios. This is based on the health dangers to people from cigarettes and the image that companies are pushing addictive cigarettes onto the public.

Other types of products or services considered ethically unfit to invest in include oil and oil companies, chemical makers and suppliers, and mining operations. Most of these types of companies are avoided due to their environmentally unfriendly production procedures.

Socially acceptable companies often include the green companies. Solar or wind energy companies are considered good choices because their products do not pollute the environment. Water processing companies would also be included in this category. They provide a benefit to people in countries who do not have clean water.

Choosing to invest in socially responsible companies is based on a personal value choice. In the past, socially responsible investing did not return as much to a portfolio as the avoided companies. This was mainly due to a lack of well-constructed and available mutual funds. An investor now has a range of socially responsible funds from which to choose. Calvert Funds and Vanguard are two fund families that offer social funds. Some are actively-managed and some are index funds.

Another option is to invest in individual stocks of socially responsible companies. Individual stocks allow an investor to choose just which companies meet the investor's moral and ethical values. A little research is needed as well. Many large companies have vast holdings in many products and services so it is important to know just what a company does deal in. Fortunately, the internet provides a wealth of research on any publicly traded company being considered for the portfolio.

Socially responsible investing can be a wonderful way for an investor to follow their values and invest their money. This kind of portfolio can return as robust a gain as a portfolio invested in non-socially acceptable companies. However, choosing to invest ethically is often the more important goal to investors choosing this approach. This way an investor's financial goals can be met while supporting the good of humanity and the planet.

May I recommend my ebook, Investing $10K in 2013

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This content was written by Sandra Baublitz. If you wish to use this content in any manner, you need written permission. Contact Sandra Baublitz for details.



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