You may want to consider ethical investing to make a difference with your money. Ethical investing focuses on social responsibility, environmental responsibility, and corporate governance, among other factors.
There are many different ways to invest ethically – from individual stocks to exchange-traded funds (ETFs) that track particular stock indices or sectors – but no matter what approach you take, it’s important to do thorough research before getting started.
This how-to guide discusses how you can use your investing power to make positive changes in the world today.
What Is An Ethical Investment?
Ethical investment is an investment that reflects your values. Choosing what stocks to invest in will depend on how you define ethical investment. Some might say that any company involved in producing nuclear weapons is unethical.
Others might believe an ethical company should provide fair wages to its employees or be environmentally friendly.
Of course, many stocks and ETFs are available for those with specific ethics needs; but it’s important to know the basics before jumping into this niche market.
Why Should I Bother With Investing In Ethical Stocks and ETFs
Knowing where your money is going is important. Putting it towards an investment you believe in, with a company that shares your values, is even more important. But why should you bother with ethical investments?
The reality is that the world needs to change. And if people are unwilling to use their power for good, what kind of world will we have left for future generations?
That’s why investing in ethical stocks and ETFs can be worthwhile. It’s about making a real difference for the people around us – not just by giving them access to quality resources or putting a roof over their heads but by creating opportunities for sustainable development, a better education system, and infrastructure upgrades all over the world!
Types of Stocks
The key types of stocks are common and preferred. For common stocks, the shareholders have voting rights and receive dividend payments. With preferred stocks, the investors don’t have voting rights but receive preferential dividend payments over the common stockholders.
Types of ETFs
ETF is made up of index and actively managed funds. Index funds are passively managed, meaning that the fund will track the performance of a specific market index.
Actively managed funds have a manager who decides which securities to buy and sell to outperform an appropriate benchmark but with higher fees than those for index funds.
What affects the price?
When you buy or sell stocks, the price is determined by how much supply and demand there is. The more people who want to buy a stock, the higher the stock price will be. When people want to sell stocks, this will negatively affect the price.
Suppose investors expect a company’s earnings to be very low compared to what it has made in previous years. In that case, this will decrease demand for that company’s stock because people are less likely to invest if they don’t think it’ll return anything significant.
For ETFs, the price changes based on the performance of the underlying stocks. For example, an ethical investor owns an ETF that invests in pharmaceutical companies focusing on drug development aimed at diseases affecting Africa, like AIDS and malaria.
One day an investment group buys out one of the holding companies within this fund.
Now the value of the entire fund goes down as people sell their shares due to fear over how future acquisitions might happen.
How Do I Buy Into An Exchange Traded Fund (ETF)?
Although the process may seem intimidating, buying into an exchange-traded fund (ETF) is relatively straightforward. To buy into an ETF, you need to know what kinds of stocks or bonds it invests in.
Once you’ve established that, open up a brokerage account. The next step is setting up your buying order with your broker-dealer by showing them how much money you want to invest in shares and how many you want to buy.
The investment world can be a competitive place. It is not just about finding the best opportunity for your money; it is also about finding the company or company with the values you believe in.
All of this may seem like hard work, but by investing in ethical stocks and ETFs, we are actively participating in a way to change the system.
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