Investing in the stock market can feel like eating your Wheaties, except that Wheaties are at least somewhat tasty. It’s one of those “responsible adulting” things you know you’re supposed to do, but is often at the bottom of a long to-do list as it’s so easy to put off for later.
If you didn’t grow up in a family where stocks were discussed at the dinner table, investing may feel both intimidating and confusing. We may feel like we don’t have enough information to make good choices, nor enough money for a financial advisor, or other practical concerns about how to get started.
But another major reason I suspect it’s hard to get started investing in the stock market is that it doesn’t align with our values in two major ways:
- We like to be proud of the things we own. And when we invest in mutual funds where our money is getting spread throughout the world — in the companies we see in the news all the time for their bad behavior — we know it’s likely supporting things like dangerous pesticides, exploitative workplaces, mass incarceration, deforestation, child labor, the cigarette industry, and more. It’s fun to make money — but not when it’s at someone else’s expense.
- We like to make money from our own hard work. For instance, when you buy your first home, even if you didn’t build it yourself, there’s a sense of pride in knowing you earned the money for it through your time and effort, and from that perspective, created it with your own hands. You can feel proud of the wealth it builds for you and your family over time, as a result of your own sweat, blood and tears (hopefully not too many tears).
Not so when you make money from stocks. Making money off the stock market is by nature speculative — and not in that Rocky Mountain, go harvest some gold kind of way. If you make money from the stock market, you don’t necessarily create more value for society. It’s just a step above gambling in terms of making guesses about the direction of the market. This can of course be fun — picking the right stock can feel like buying the winning lottery ticket — but it doesn’t feel particularly productive.
There’s certainly the argument that a robust stock market is what keeps the global economy functioning (as that’s where companies can raise the cash they want), but it’s hard as an individual to feel like you did something productive, rather than just taking advantage of how society moves money around.
All these reservations may be true, but…you still need to eat your Wheaties if you want to retire someday. So what can help you get more excited about investing in the stock market?
Social investing brings more fun and meaning to the stock market, and is getting easier and easier to do.
Social investing, when applied to the stock market, means choosing stocks in part based on the social and environmental impact of what the companies are doing in the world. This is usually addressed in three ways: by buying companies that are real leaders (like renewable energy companies, or companies with exemplary worker practices), using shareholder power to encourage companies to improve their practices, and then avoiding some of the worst companies (as Liesel Pritzker says, “things when used correctly, kill people”) — like guns and cigarettes.
This means rather than feeling like you’re making money by pushing papers around, you can see that your investment is making tangible change in the world. And the good news is that from the Harvard Business Review to Deutsche Bank to the largest pension funds in the world, it’s increasingly being found that paying attention to proper environmental, social and governance factors (often collectively called “ESG”) can actually make companies more profitable, too.
Hopefully knowing your money can make you money, AND do good in the world helps move investing in the stock market a nudge higher on your to-do list. Here are three different ways to get started:
- If you want to invest from the palm of your hand, check out a social robo-advisor. That’s right, the robo prefix isn’t just for cops anymore — robo advisors are the new-ish trend that allow people to invest in mutual funds with minimal fees. Everything can be done online, and with minimal fees. Two great options are Swell Investing and OpenInvest, where people can open accounts for as little as $50 or $100, respectively.
Swell Investing offers seven portfolios of public equities — six thematic portfolios, and their recently launched Impact 400. Impact 400 includes a total of (you guessed it) 400 public equities, which align with all 17 of the UN Sustainable Development Goals — goals like clean water and sanitation, responsible consumption and production, and reduced inequality. Swell then seeks out companies that derive revenue from a product or service that aligns with these goals. For example, in the Zero Waste portfolio you’ll find Mohawk Industries, a company that recycles 5.4 billion plastic water bottles annually to make carpets. Within Swell’s unique platform, investors can see detailed information on each company, including how its business model is working towards positive progress and which UN SDGs it aligns with.
OpenInvest is another option for navigating the stock market, which — unlike Swell’s human-curated portfolios — is powered by algorithms in true futuristic style. Thier goal is to mainstream ethical investing by making it easy, personalized, and social. OpenInvest lets you mix and match issues — so you could select a portfolio that prefers companies that are leaders on climate and gender diversity, for example. With OpenInvest you can “divest-invest with a swipe, vote shareholder resolutions, participate in mass campaigns, measure your impact, and claim the power that is rightfully yours in public markets,” according to Claire Veuthey, Director of ESG & Impact.
Knowing that people want to make money just as much as they want to make social change, companies like Swell and OpenInvest have also been conscious to keep costs low compared to the average investment house. For instance, see how OpenInvest compares to Vanguard, a traditional investment platform:
2. If a robo-advisor isn’t your style, and you already have a financial advisor — talk to them! Usually when you start working with a financial advisor they will provide you with an extensive survey about what you want from your money — whether it’s to retire at age 40 or 80 — and how much risk you’re willing to tolerate. But many don’t ask the critical question — how much social harm are you willing to tolerate as you make money? Are there cases where you might actually be open to making slightly less money, in order to sleep better at night? There are a ton of socially responsible investing funds, such as Calvert, Trilium and Parnassus, that you can ask your advisor to research — and if they are truly resistant to putting in the work, then it may just be time for a new advisor.
3. If your current financial advisor doesn’t care about social harm, hire a new one — with new values. Increasingly you can find financial advisors who specialize in social investing — a number are listed through the First Affirmative Financial Network who take clients of various sizes across the country, and then some catering to more high-net-worth clientele and institutions are on this list carefully curated by Toniic. These advisors make sure to follow the trends in social investing, and can help identify the funds that best fit both your social values and financial return expectations.
Social investing can be the strawberries in your Wheaties — you can get all the benefits of a long-term investment strategy, along with a little bit of color and flavor. And with low minimum investment amounts, it’s easy to try things out and decide what fits you best. The most important thing — like anything on your to-do list — is to just pick something and get started!
Disclaimer: Taking a dose of her own medicine, the author currently or has previously owned shares in mutual funds managed by Calvert, Trilium and Parnassus mentioned here. She, nor anyone else, receives compensation for their being listed, and in general, any information provided is solely as financial education — it is neither a recommendation nor an offer of securities. As always ask your advisor what is right for you.