How To Choose The Best ETFs For Your Portfolio
Responsible investing, often called socially responsible investing (SRI), has become increasingly popular in recent years with investors who care about the companies they invest in and the impacts of those companies on society and the world.
Socially responsible ETFs, which are funds holding stocks or other securities that meet specific social responsibility or ethical criteria, are among the most common SRI investments offered to individual investors.
If you’re interested in socially responsible ETFs, here’s how to choose among them.
What Does Ethical Mean in Investing?
The term ethical investing is used to describe investments made to generate a social and/or environmental good. This type of investment is characterized by high consideration for financial return and the impact on society and the environment. Investing in companies involved in activities such as gambling, alcohol, pornography, tobacco, or armaments is typically avoided by ethical investors because they believe that these activities often lead to social problems such as addiction and violence.
Investments in companies involved in activities such as mining, oil drilling, logging operations, and pollution are also typically avoided because they can potentially have an adverse impact on the environment, leading to climate change or other environmental disasters.
What Are ETFs?
ETF stands for Exchange Traded Fund and is an investment fund that trades on a stock exchange. These funds are popular because they have low fees, are diversified, and have the potential to grow in value. They can be an excellent way for a long-term investor to invest in different stocks or asset classes without actually buying the stocks themselves.
Investing in an ETF can allow you to take advantage of market movements without doing all the research yourself. You need to pick an ETF that invests in what you want.
Why Choose Socially Responsible ETFs Over Mutual Funds?
Mutual funds are investment vehicles made up of stocks and other securities. They can be actively managed by the fund manager or passively managed by indexing to a benchmark like the S&P 500. Socially responsible investing, or SRI, is a strategy that attempts to avoid investments in companies that are considered harmful to society or the environment.
Socially responsible investing is a growing trend among millennials with limited options when investing their own money due to student debt and low-paying jobs. But SRI can be done with mutual funds as well.
How Do I Select The Best One?
It is no easy task to choose the best ETF for your portfolio. I feel it is important to identify the type of investments you are looking for, how much risk you can take, and the length of time you want to invest. Once those questions are answered, it will be easier to decide which one is right for you.
As far as socially responsible funds go, there are a lot of different options depending on what your values may be. Some investors might focus on companies with higher standards regarding environmental impact or animal welfare, while others may focus more on employee policies and worker safety. It all depends on your values as an investor and what is most important to you regarding your investment goals.
Conclusion
Choosing the best socially responsible ETFs for your portfolio can help you find a way to invest in the companies you believe are making positive changes in the world. You should always research and understand what your goals are before starting any new investment strategy so that you can make sure it is aligned with your values.
