So you have a little extra? It’s time to think about 10…20…30…40 years from now. It’s hazy out there but, I think I see your FUTURE!! You: cool, old, and having money for stuff. Now is the time to set that person up, whether it’s to the tune of socking away $25 or $500 a month.
For investors interested in replacing the most egregious corporate orgres with more values-aligned ones in their retirement or personal investments, there are several newer options available you should be aware of. Two things are making this possible for wee investors like me, and anyone else with under a $Million dollars. You know, us little guys, the ones who don’t have enough capital for custom portfolios. Let’s look at what we can access and why.
First in our favor, algorithm-driven investing, known as roboadvising, has grown in quality and popularity, so more and more brokerages are offering low-cost, well-diversified portfolio investing: diversification done-for-you. Here’s why that’s great.
When you’re investing, you think about a couple things at once:
- Where (in the market) is my money
- Where (in the world) is my money
- How big or small are the companies with my money
- How reliable or changing are the companies with my money
Because the goal is to hedge your bets on all sides, an ideal investment is actually a portfolio of many indexed funds in several asset classes. In regular words, that means: your eggs are in many baskets – and they’re many kinds of eggs. If one basket drops, or one kind of egg is bad – there’s still a lot else keeping your pantry stocked.
Second, the demand for fossil-fuel free investments and Socially Responsible funds (SRI) has grown tremendously in the last two years, as both millennials enter the investment market (Hey career time! Hey retirement fund!) and the expensive effects of climate change are signalling they will impact the bottom line of fossil-fuel-focused companies.
The market has responded to these requests, and affordable, diversified portfolios that divest from destruction are available. Here’s a snapshot of three roboadvisors and their SRI offerings:
|Roboadvisor NAME||WealthSimple||Stash Invest||Betterment|
|Annual cost (expenses)||ETF fees + 0.50% fee||ETF fees + 0.25% fee + $1/month under $5k||ETF fees + 0.25% fee|
|Setup + SRI details||Walks you through a risk intake to create an asset mix they construct that has 3 tiers; SRI is either “on” or “off”’; less flexible, more .||You select individual funds ad hoc; SRI options would be chosen among these selections. But, you’re not automagically fully diversified + will need to own several funds to be.||You fill out a form to start you off with a suggested risk/asset balance which you can change easily; SRI is either “on” or “off”’; you are in one SRI equity fund.|
|1-5 how “SRI” is it?||5 – most of ‘em all||4 – up to what you pick||3 – only one fund is SRI|
SRI & THESE ACCOUNTS
Pro tip: Socially Responsible Investing looks like Coke instead of Monsanto, and Microsoft instead of Wells Fargo. It’s not perfect, it’s “better.” Go for whatever you feel right about – and my 0.02 is to
Betterment is no-nonsense and affordable with their SRI portfolio. They state: https://www.betterment.com/resources/inside-betterment/product-news/socially-responsible-investing-portfolio/
“the only asset class (i.e., portfolio component) that we could confidently replace with an SRI alternative today is the U.S. large-capitalization stock allocation. Other asset classes, such as value, small-cap, and international stocks and bonds are not replaced with an SRI alternative in our portfolio either because an acceptable alternative doesn’t yet exist or because the respective fund’s fees or liquidity make for a prohibitively high cost to you, the customer.”
At 0.25% management fees it’s one of the lowest Roboadvisors out there, and offers you options to buy into various kinds of SRI and world-unf&$ing ETFs.
Scroll down to the “Focus on the Earth and Equality” section, where you have four fund options to invest in. Two of them are indexes, and two track specific market segments.
The difference, as we mentioned above, is that indexes may have one size of company in one location (large cap US), but have many market segments in them (tech, financials, renewable energy) etc. Since one of your goals is hedging your bets against any one particular market segment crashing, you want to make sure your money isn’t only in, say water or solar or tech.
Offers a diversified, asset allocated mix that includes 6 SRI ETFs, making it the most SRI-friendly, cost-effective way to get your investments low-carbon-emissions and pro-positive change, though their fees are a wee bit higher:
Because so many of you are asking about where and how to invest affordably with your ethics, and without having to get an advanced quantitative mathematics degree, I think these are incredibly smart choices. While I currently have gone with Betterment for my non-retirement post-tax savings, them or any roboadvisor or intelligent/portfolio/target fund from a regular brokerage would do the same thing: diversify my money, get me into index funds, and do it affordably and simply.