Financial Planning
September 14, 2022

Investing Ethically

For some, money-making potential isn’t the only consideration
Stewart Willis
Co-Founder & Co-Owner Asset Preservation Tax & Retirement

If you’ve read financial news this year, you’ve probably heard of Ethical investing. People are increasingly considering whether they’re morally comfortable with supporting the organizations behind their investments. Often, they make investment choices based on their ethical viewpoints.

 

Ethical investing is something people with a wide variety of beliefs can, and do, practice. From Environmental, Social and Governance (ESG) investing with firms like BlackRock to the MAGA ETF through Point Bridge Capital, ethical investing opportunities run the gamut of personal and political views.

 

If you decide you want to consider your personal ethics as part of your investment decision-making process, there are important considerations. First, you must determine whether the investments you’re considering align with your ethics. Then you need to strategize your investments in ways that support your ethical goals while avoiding major risks in the process.

 

Determining Ethical Matches

 

Sites like Morningstar.com are a good starting point for determining whether a given investment fits your personal values. Using information from those sites, you can determine what investments a fund you’re considering has in its portfolio. If those investments include organizations that operate counter to your morals, you might choose not to use that fund regardless of the financial risk/reward calculation. On the other hand, if you like the values of the fund's investments, that could sway your decision to invest.

 

However, you should be aware that funds are not set in stone. They can change their portfolios which means they might drop investments you want to support or acquire ones you don’t. Plus, the information you use to determine what a fund invests in may not be current at the time you read it.

 

All this boils down to the idea that even if you heavily research investment vehicles in an attempt to align your choices with your values, it can be difficult to guarantee that 100% of your money will go only to organizations you support. It’s very important to understand that you can only do so much when attempting to align your investments with your ethics, as it’s virtually impossible to ensure that your investment money will never end up working against your morals.

 

Don’t Forget Risk

 

Investing ethically may be a small comfort if it causes you to reduce your standard of living in retirement or postpone retirement altogether. A balanced portfolio is still key; even if there’s a social cause you firmly believe in, it’s an investing mistake to put all your eggs in that one basket. If that cause proves to be financially untenable, you risk losing too much if your investments are too concentrated around it. You can support that cause with some of your investment dollars while also investing in other areas to balance your risk.

 

With that approach, it’s entirely possible to find an investment strategy you can ethically get behind, and which also makes good financial sense. It does, however, require particular care to do so. Ordinary investing is complex as itis - adding an ethical layer on top of it makes the situation even more complicated!

 

Seek Professional Guidance

 

Because ethical investing is so complex, it’s a very good idea to get help from a financial advisor. It’s very easy to make a rash decision to invest - or divest - based on your ethical viewpoint, forgetting to think about the impact on your finances. A financial advisor can help you understand the potential financial consequences of your ethically-based investment plan. They can work with you to balance your portfolio, ensuring you don’t take on too much risk in the name of morality, and explain the financial implications of your ethical goals. Working with a financial advisor can help you find ways to make your morality work with your monetary decisions.

 

At Asset Preservation Wealth & Tax, we often work with clients who want to support certain causes and companies or don’t want to support others. We see it as our responsibility to help them find investments they can be comfortable with both morally and financially. With the right approach and good professional guidance, you can choose a sound investment strategy that also aligns with your values.

Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Rates and Guarantees provided by insurance products and annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.

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