How to Green Your Investment Portfolio
By Rebecca Paul (from Inhabitat) on December 21, 2011
The mere thought of starting an investment portfolio can be daunting, so greening your financial efforts might seem too overwhelming to even consider. But, don't let that stop you - life's biggest challenges often produce the greatest rewards! Plus, there are lots of online resources available to help you make informed choices and bring in the big bucks (hopefully). If making money while also making the world a better place is your goal, there are two types of investing one should consider: socially responsible investing and green investing. Read on to learn about the differences between the two and pick up some tips to get you started.
Socially Responsible Investing
Before you're ready to start purchasing anything, you first need to determine where your investment interests lie. When it comes to socially responsible investing, there are two approaches one can take - exclusionary or inclusionary. Exclusionary investing is when one decides NOT to invest in a company based on moral factors like alcohol, pornography or tobacco. Inclusionary is the opposite approach - instead of withholding funds, one chooses to invest money in a company that either supports a specific social goal. When you invest in companies that share and support social goals that you care about, you are supporting their efforts and increasing their stock value.
For both methods, it's key to look into a company's practices to ensure that their goals are aligned (or not aligned) with yours. These days we've seen more businesses directly addressing issues of sustainability beyond their monetary profit margins. This is most commonly known as corporate social responsibility. There is currently no standard to measure the value of these practices, so many companies are taking it upon themselves to make their efforts known to the public. Along with their annual reports on cash flow, income statements, balance sheets, and changes in equity, many companies and are also including sustainability reports. If the company you're researching is public, you can access these reports by checking out Sustainability-reports.com or visiting the company's website.
Green Investing
You can also choose to invest your money in green industries like renewable energy, energy storage, or biofuels. With this approach there are three main options one should consider: buying stock in green companies, investing in green mutual funds, and green exchange-traded funds (ETFs).Buying Green Stocks Options
When looking into buying green stock options, it's extremely important to do your homework prior to making any big decisions - some consider this industry to be dynamic and unpredictable. We suggest that you take some time to read this extensive getting started guide that explains all of the industry's nuances in a way that is easy for everyone to understand.Green Mutual Funds and ETFs
Mutual funds generally have high expense ratios, even when compared to similar funds that are actively managed. However mutual funds require less maintenance on your part and they could be the right option if you're investing through a 401(k) plan. Even though most plans don't currently offer green or renewable funds as an option, some are putting in the effort to get companies on board by offering a federal tax credit. Green ETFs On the other hand, exchange-traded funds usually have lower expense ratios and more flexibility (for example, they can trade throughout the day). It can be difficult to measure the cost benefit of ETFs versus mutual funds, however - in some instances the costs associated with trading ETFs can eat up the money one saves with the smaller expense ratio. Whichever path you choose, the most important thing to remember is that there are no free rides when investing your money - you need to get involved and get informed. Only then can you determine what's best for you and for the health of your portfolio. To help set you on the right path we've rounded up the best resources available online.Basic Guides:
Industry Trends:
Who to Follow on Twitter:
How can you make a difference when investing your money?
See more from Inhabitat:
10 Tech Tips for a Green + Healthy Workplace
5 Apps To Stop a Temper Tantrum in its Tracks
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Inhabitat is an online magazine devoted to the future of design, tracking the innovations in technology, practices and materials that are pushing architecture and design towards a smarter and more sustainable future. Written by a young tech-savvy team designers and design journalists, Inhabitat delivers fresh content daily, showcasing emerging work from the cutting-edge of the global design community. Rebecca Paul is the Manager of Business Operations and a NYC Editor for Inhabitat.com. She is a writer, designer & grad student currently pursuing a masters degree in strategic design and business management at the Pratt Institute in New York City.
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