Ethical Investing

DEFINITION of 'Ethical Investing'

Using one's ethical principles as the main filter for securities selection. Ethical investing depends on an investor's views; some may choose to eliminate certain industries entirely (such as gambling, alcohol, or firearms) or to over-allocate to industries that meet the individual's ethical guidelines.

Ethical investing is sometimes used interchangeably with socially conscious investing, but socially conscious funds typically have one overarching set of guidelines that is used to select the portfolio, whereas ethical investing brings about a more personalized result.

BREAKING DOWN 'Ethical Investing'

Ethical investing gives individuals the power to allocate capital toward companies that are in line with their personal views, whether they are based on environmental, religious or political precepts. Investors should keep in mind that "ethical" does not imply "outperform."

A good way to start with an ethical investing policy is to write down the areas you want to avoid as well as where you want to see your money invested. From there you can come up with an asset allocation plan and begin researching individual securities and funds.

 

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