The longer I work with people both on money and as a technology design strategist, the more certain I am that decisions are difficult, period — and all the more so when there are several factors at play.
Luckily, there are ways to strip away complexity, and make deciding what the heck to do easier. However, these require actively thinking in new ways.
Thinking in new ways, hmm – that’s kinda like how a lot of us are rethinking the current economic order so as to create restorative, circular, abundant and cooperative economies that don’t decimate the world and each other even as we participate in the current system to the best of our ability in the name of self-preservation. š
I believe that you already know how to think in new ways.
What I help with are frameworks in which to do so. Therefore, I’m sharing a few new tools to help you simplify the decisions you make around money and your future, in particular about investing, so you can stop dragging and choose what’s right for you.
Deciding about Investing: five steps
There are five major decisions you need to make to invest (or really, to manage your money):
- Conscience — what do you care about enough to act on?
- Cash — how much money are you starting with, and will you add more regularly?
- Container — what kinds of accounts might you need, based on your goals?
- Content — what will you have IN those accounts? how can you bring your values in, without making investing your full-time job?
- Company — finally, which company do you want to work with given the kinds of accounts, amount of money, and contents you want to have?
In my workshop on exploring ethical investing, we walk through each of these in as jargon-free and practical a way as possible. But, learning some of the base terms WILL help you make your investing decisions.
Learn the lingo of ethical investing?
Below is a partial glossary, and below that, a quick exercise to help you start thinking about investing… so you can think about how you might approach it.
Partial Glossary
Accredited Investor — someone with at least $1M to invest or an income of $200k+ / year. When you are accredited certain investments, including many impact investments are open to you that are not available to the non-accredited.Ā
Advisor ā a person who is registered and certified to invest on your behalf or make investment recommendations customized for you. Usually you need to have at least $250k – and often $1M – in investable assets before a financial advisor will work with you.
ESG – Environmental, Social and Governance (ESG) factors are collected by corporations, and may be used by impact investors as part of their investment analysis as a way to evaluate whether their investments promote sustainable, fair and effective practices and mitigate potential risks. ESG may be referred to as “ESG investments” or “Responsible investing.” [read more].
Equities ā Stocks. A fancy word for stocks.
Expenses — you realize that none of this is free, right? Every fund or ETF you invest in will come with a fee. Additionally, companies may charge you a fee. If you have an advisor they will also charge you a fee. Check out what the fees are ahead of time babes! You might think 1% fee is small until you realize youāre only really going to earn 5% and do the math to realize that 1% is actually TWENTY percent of what you earned. Avoid load funds and 12-b fees and look for .5 or ideally .25% and under fees unless you have good reason otherwise!
Fossil-fuel free ā A fund that has screened out investment in companies that make money from fossil fuels or retain fossil fuel reserves.
Impact Investing — Term coined in 2007 by the Rockefeller Foundation to describe a spectrum of investment practices intended to generate positive social and/or environmental impact alongside financial return. Given that the concept was developed by (and arguably for) tactics involving millions of dollars, the majority of Impact Investment tactics and products are designed for people (or foundations) with a lot of money and arenāt available to those of us with mere hundreds to thousands behind our good intentions. However, the concept of impact investing is important because it built out the idea that fiscal responsibility also can include social/environmental improvements.
Portfolio ā the collection of things youāve invested in. People make it sound all fancy ~ohh Investment Portfolio~ but it could as easily be called your āInvestment Egg Cartonā or your āInvestment Closet.ā You just donāt want it to be your āInvestment Grab Bag o Random Stuff I Vaguely Loatheā or your āInvestment Empty Purseā ā and that is why learning about investing is important.Ā
Snapshot: Socially Responsible (SRI) & Impact Investing
Also known as sustainable, ethical, or values-based investing, socially responsible investing (SRI) describes investment strategies that integrate social and environmental factors into decision-making.
SRI avoids putting money into companies with a negative impact on society or the environment.
This, friends, is a negative screen.
In order to screen out what you don’t want to invest in, start with a clear list of what exactly that is and then prioritize it, since you are unlikely to get everything on your list. Here’s an example.
Impact investing aims to promote a positive social or environmental outcome while still earning financial returns. This is what differentiates it from donations and giving, which don’t aim to get money back based on the gift.
Impact investing uses a positive screen: looking to achieve or do something (rather than avoid something, as in a negative screen). Create a list of 1-5 impacts you want to achieve, and rank them in order of importance to you.
What not to do
Keep yourself from entering a research wormhole of endless proportion, where you will inevitably discover that the “most responsible” and “most impactful” investments are open only to those with $1M to start.
Do not try to get a gold star in ethical capitalism – it does not exist. Do not hold your investing to a higher standard than your everyday shopping.
What to try instead
Create and use a *prioritized* list of positive and negative screens that matter to you. Identify one you’re going to focus on for any particular investment.
Think of it like food: you might choose organic, or shop at a co-op, or be part of a CSA, or all of the above – but at the end of the day you transact money, potentially through a credit card processor to buy your food. The food might be in packaging. The store itself might have to pay rent to a dirtbag landlord. You might drive there, or you might ride a bike; your might use a plastic bag or a reusable one; you might cook on pots and pans bought at a box store or handcrafted by your grandparent. But you probably don’t hit every element to the tune of “perfectly ethical with no negative impact, ever” – AND THAT’S OK.
Trying to do so will take over your life. Instead, pick one or two elements to focus on, and do GREAT on them.
Resources to learn more
WORKSHOP
Exploring Ethical Investing workshop — sign up for the next session here.
READINGS
Shop smarter! Learn about divesting and investing with your spending here
Alllll about fossil fuels and fiduciary responsibility.
Socially Responsible Investing and Robo Advisors https://womenwhomoney.com/robo-advisors-socially-responsible-investing/, by Brynne ConroyĀ of Femme Frugality.Ā
Make a Clean Break: Your Guide to Fossil Free Investing: https://trilliuminvest.com/wp-content/uploads/2017/04/Make-a-clean-break_4.13.17.pdf
Find Socially Responsible funds based on various criteria. https://divestinvestguide.org/find-a-fund/
Want a description of literally every investment term EVER? For a truly deep dive, click here (not for faint of heart!): https://www.thebalance.com/investing-terms-you-should-know-356338