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Twenty years or so ago, ‘Ethical Investing’ was just a buzzword, now it’s driving much of the demand from people looking to put their money into things that matter.
By Julie Nipperess
I get asked about ‘ethical investing’ on a fairly regular basis. Quite simply, it’s a term that means investing in things that speak to your personal values, whether these are social, moral, religious or political.
Since the 1990s, ‘ethical investing’ has grown exponentially. Originally, the term referred to investments which focused heavily on environmental issues, but the definition is broader today – and it includes companies that are seeking to advance society in a positive way.
With increasing pressure from both consumers and investors, many companies are taking the idea of being ‘ethical’ and ‘sustainable’ and ‘socially responsible’ very seriously and their annual reports will detail what they are doing in this regard.
But – a word of caution. Be wary of choosing ‘ethical investing‘ over all other types of investing just so you can feel good as you go to sleep at night.
That’s not to say I’m a big champion of petrol, oil or tobacco, or perpetrators of sweatshops, either. It’s just that I like to steer clients to make choices that will result in a balanced portfolio and not get caught in a ‘niche’.
A balanced portfolio is one that offers you diversity, so that when market turbulence hits, if some of your shares are not doing so well, then the chances are the others in your portfolio will be going ok. Then, when the annual returns are all averaged out, the result is a solid performance overall.
The other thing you want your portfolio to deliver is stability – and this also comes with diversification. Stability is critical because the share market is cyclical – therefore it inherently has a certain degree of risk.
Successful investing requires mitigating that risk and the best way to do that is with a portfolio that’s varied.
The good news for anyone interested in ‘ethical investment’ is that there are a growing number of fund managers that offer funds with investments specifically chosen for their “ethical” nature.
This means that you have the opportunity to ‘cherry pick’ funds invested in companies that interest you, should you choose to do so.
For example, you might want to invest in the fledgling medicinal marijuana industry, or organic foods, or companies that make products out of recycled plastics, or businesses that are manufacturing devices that will aid with sea pollution or renewable energy. The list goes on … and it’s entirely up to you and what interests you.
Often, when people get to pick and choose the companies they invest in, they have a greater sense of involvement and commitment in what their money is actually supporting. This is a good thing, because there is much to be learned by sitting on the sidelines and looking at the multifarious reasons why share prices rise and fall.
If you want to know more about ‘ethical investing’ then please talk to us.
We’re happy to help you build a portfolio that puts your money into things that matter to you, while ensuring you have the right investment strategy to produce steady returns over the long term.
This is general advice and should not be treated as personal advice. Julie Nipperess is an authorised representative of Step Up Financial Group Pty Ltd ASFL No: 512509.