Stock sell-offs and rallies often march together

Learn How to Back Your Beliefs with Social Investing

A successful grassroots advocacy campaign leads to consumers asking more questions – and businesses delivering answers. Jewelers offer detailed information and guarantees about how they source precious stones. Grocers devote more and more shelf space to organic products.

Socially responsible investing (SRI) is gaining visibility as an extension of these broader trends in personal finance and wealth management. On a big-picture level, it allows investors to translate their beliefs about the environment, social and moral issues, and corporate governance into financial decisions.

“Financial planning centers around goals, but it’s worth noting the volume of choices available to reach them,” said Joe Correnti, senior vice president of brokerage product. “Investors today can easily access tools that help put their personal values to work toward their financial goals.”

Finding Your Values

You can start your SRI strategy by taking inventory of your particular beliefs: What does “socially responsible” mean to you?

The concept of socially responsible investing has evolved. Initially, it meant filtering out companies that violated an investor’s moral or ethical standards. But now, the definition has expanded. Market analysts recognize socially-conscious firms for committing to any or all of the following non-financial performance indicators:

  1. Environmental stewardship through alternative energy production or waste reduction.
  2. Social good as defined by ethical, moral and/or spiritual guidelines.
  3. Governance concerns that include human rights, labor relations and community investment.

Once you’ve identified areas of interest, you can apply them to investing opportunities.

“If you believe that SRI should be a part of your decision process, you should stay informed on the types of companies you’re investing in,” said Correnti. “You also should remember that lowering your portfolio diversity means accepting higher risk for your investments.”

Funding Your Goals

After you know the guiding principles for your SRI plan, there are several investment choices to help you become a financial backer for your beliefs. Through screening tools, you can filter a list of investment products that address SRI concerns and find solutions that align with your strategy.

Conversely, negative screening allows you to filter investments by what is not suitable for your SRI strategy. For example, many SRI products exclude securities that derive revenue from what some might consider to be vices, such as alcohol, tobacco and gambling.

Scottrade offers screening tools to both clients and the general public. Using the “Socially Responsible” filter returns hundreds of mutual funds and several dozen exchange-traded funds – or ETFs. Both mutual funds and ETFs offer a simpler path to diversification by holding a wide variety of securities. But investors also should be aware of the bottom line: You still need a fund that aligns with your investing goals and your risk tolerance.

If you hold a particular environmental, social or governance issue above other investment considerations, you may require additional control beyond mutual funds or ETFs. Individual stock selection is more hands-on, and it offers the ultimate assurance that you’re investing in companies that share your concerns. But like a vegetarian moving into a vegan diet, this level of absolute commitment requires additional preparation and knowledge.

“Research and choice are the 2 recurring tenets of SRI, but they also apply to all sound investment plans,” said Correnti. “Start with your goals, consider how much time you’ll need to reach them and chart a course to get there on your terms."

[Next Step] You can research social responsible mutual funds and ETFs in our Quotes & Research page. Clients can conduct a more robust search by logging in and checking out the Quotes & Research tab.

The content provided is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances, and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.

Diversification may help spread risk, but it does not assure a profit, or protect against loss, in a down market.

Screener results are returned based upon previous market close values.

This screening tool is provided to help self-directed investors evaluate securities. It does not consider your particular investment objectives or financial situation and does not make personalized recommendations. The investment strategies and the securities shown may not be appropriate for you. You should evaluate each strategy and security according to your investment objectives, financial situation, risk tolerance, and asset allocation plan. The screening criteria used for each strategy and the screening results represent one sample execution of the particular strategy. Scottrade may change the screening criteria at any time. The screening criteria and the screened securities shown may not match your needs. You can modify the criteria as you see fit. This tool should not be construed as an offer to sell or a solicitation of an offer to buy any security. Click on the security's symbol above for more information including risks.

Investors should consider the investment objectives, charges, expense and unique risk profile of an exchange-traded fund (ETF) or mutual fund before investing. A prospectus contains this and other information about the fund and may be obtained online or by contacting Scottrade. The prospectus should be read carefully before investing.

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