Socially Responsible Investing: How to Invest with Your Conscience
Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
Socially Responsible Investing: How to Invest with Your Conscience I can understand why investors want to invest with their conscience. Socially responsible investing can mean choosing companies that are sensitive to issues like the environment, consumers’ rights, human rights, and diversity. It can also mean…
I can understand why investors want to invest with their conscience.
Socially responsible investing can mean choosing companies that are sensitive to issues like the environment, consumers’ rights, human rights, and diversity. It can also mean choosing not to support companies whose business is tied to alcohol, gambling, military activities, or tobacco.
If you want to invest this way, or are already investing in socially responsible industries, you are not alone. One report estimated that in 2007 over $2.71 trillion was invested in a socially responsible manner.
The issue is not whether these causes are worthy. There is an obvious, nonmonetary benefit to taking a principled position and placing ethics above profits.
Viewed from an investing perspective, however, socially responsible investing can be problematic. Most socially responsible funds are “actively managed,” which means the fund manager attempts to beat a designated benchmark. The data on actively managed funds is dismal. Because of their high costs (the average expense ratio of these funds is 1.33 percent), only a very small percentage of them are able to equal (much less beat) their benchmark over time. For this reason, I recommend against investing in any actively managed fund—socially responsible or otherwise.
There is another way to be socially responsible in investing. Some low-cost index funds and exchange-traded funds (ETFs) screen for various social criteria. These funds have low expense ratios and track designated indexes. Here are some of the better ones:
Those funds have a broad social agenda, but you can be narrower in your focus:
Be a Socially Responsible AND a Smart Investor
If you decide to engage in socially responsible investing, remember not to abandon the basic principles of smart investing. You still need to focus on your asset allocation (the division of your portfolio between stocks and bonds), and your entire portfolio should consist only of globally diversified, low-cost, high-quality stock and bond index funds. I make specific fund recommendations in The Smartest Investment Book You’ll Ever Read. You can modify those recommendations to include some of the low-cost, socially responsible funds I have listed here.
Dan Solin is a Senior Vice-President of Index Funds Advisors. He is the author of the New York Times best sellers The Smartest Investment Book You’ll Ever Read and The Smartest 401(k) Book You’ll Ever Read. His latest book is The Smartest Retirement Book You’ll Ever Read.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.