Investing in the Future With ESG ETFs
As the world has become more connected, it's become easier than ever for investors to choose which companies and funds they want to invest with, which has led to more people investing based on their values. One of the best ways to make sound investments based on specific values is by investing in Environmental, Social and Corporate Governance (ESG) Exchange Traded Funds (ETFs), which focus investments on environmentally friendly and/or socially desirable industries. In addition to avoiding controversy, ESG ETFs seek out profitable industries that are likely to produce healthy returns that investors can feel good about having in their portfolio.
Why are ESG ETFs Viable?
Recent shifts in international strategies from governments around the world have made green energy a high priority for many nations. That's made companies that focus on clean energy far more viable than they would have been in previous years, as their technologies are currently highly prized by both the public and private sector. When a good or service has long-term demand, it's usually a good time to invest.
Why Should Investors Consider ETFs?
ETFs are an excellent way to invest money in an industry that the investor might not know a lot about. ESG ETFs make a lot of sense for these investors because the investor places their trust in a financial expert, knowing only that the companies they invest in will be both socially responsible companies and sensible investments. No investment is free of risks, but ETFs limit risk compared to stocks because they diversify investors' portfolios, limiting the risk of a market downturn.
Which Stocks Won't Be in ESG ETFs?
Tobacco, alcohol and sex have always been controversial industries, and some people simply don't want to put their money in an industry that they would never partake in themselves. That's why you won't find any companies that gain their profits from these types of controversial industries in an ESG ETF.
These funds are aimed at appealing to all types of investors, regardless of age and values. Think "The Price Is Right": the whole family, from grandmother to toddler, would be able to invest in an ESG ETF without worry of compromising their values.
How Should Investors Start Investing in ESG ETFs?
Before making an investment, it's a good idea to have a goal in mind for the investment. For some investors, an ETF is a way to enter the market with a relatively stable fund with which they can feel good about placing their money. Others want to diversify their portfolio and add a new industry to their investments based on a good feeling about new technologies. Regardless of an investor's mindset, it's wise to carefully consider the reasons for investing before placing their money in a fund.
