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Aug 2, 2020

What is Socially Responsible Investing?

Socially responsible investing is becoming more popular as millennials are choosing to make their investments match their personal values. In this video, I explain what Socially Responsible Investing is and how you can use it in your own portfolio.

What is Socially Responsible Investing?

Socially Responsible Investing (SRI for short) means aligning your investments with your personal values. That is a very general statement, because it refers to a very broad category of investments. If you hold certain beliefs or support a particular social cause, you can choose investments that reflect that. For example, if you support environmental causes, you can choose a fund that only includes companies with good environmental practices, or a fund that specializes in solar and wind energy companies. If you are religious, there may be a variety of funds that align with your beliefs, and exclude companies that support things you don’t agree with. If you support social causes like gender equality, there are funds that focus on companies who have women in senior leadership or companies who are committed to gender income equality.

These are just examples of some categories of SRI funds. I encourage you to go online and look up socially responsible investing to see if there are funds that align with your specific values.

How do I implement it in my portfolio?

Once you’ve decided that you want to implement SRI in your portfolio, you need to figure out where you’re going to hold them. This is going to depend on the type of account in which you hold your investments.

If your only investments are within a 401k, 403b, or some other employer plan, you are going to be limited to the funds offered by the plan. Usually they provide you with a list of 10 or 15 funds to choose from, and if they don’t include an SRI specific option, you are probably out of luck. Some 401ks have a self-directed brokerage account option in which you can choose from a wider array of investments, but this isn’t always offered.

If you have an account at a financial institution that is not part of your employer plan, like an IRA, a Roth, or even a regular taxable investment account, you are going to have far more flexibility. You can probably buy pretty much anything you want. You’ll just need to figure out what fund specifically you’re interested in, and then check with your financial institution to see if you are able to buy it in your account.

If there are specific causes that you support and it’s important that your investments are consistent with your values, check out Socially Responsible Investing and consider implementing it in your portfolio.

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