It can be hard to choose socially responsible ETFs from the growing number of options. How can you choose the right fund for your investment portfolio? What are the best criteria to use in selecting one? Continue reading to learn more.
What are socially responsible ETFs?
An exchange-traded fund called a socially responsible ETF invests in companies that meet certain environmental, social and governance (ESG), criteria. These are companies that have a positive impact on the world and society. They can also be traded on stock exchanges like any other stock.
How to choose a socially responsible ETF
There are some key things you should keep in mind when choosing socially-responsible ETFs. You’ll need to think about your financial goals and objectives. What are your goals and objectives with regards to investing? Are you looking to build your wealth over time or generate income quickly? These questions will help narrow down the number of ETFs available.
Next, consider liquidity and expense ratios. If the fees charged by funds to investors are too high, they can reduce your return. Liquidity is the ease with which you can buy or sell shares of an ETF. Generally speaking, you want an ETF that trades frequently so you don’t have to keep holding onto shares you can’t sell.
Performance history and asset allocation are also important factors to consider. Some ETFs are more focused on certain sectors or themes, such as renewable energy, while others provide broad exposure to all ESG-friendly industries. There is no right or wrong answer. It all depends on the type of exposure that you are looking for.
Remember to be aware of volatility. As with all investments, there is always the possibility that prices will fluctuate. It is easy to pick a socially responsible ETF. The key is to know what factors to consider.
The benefits of investing in socially responsible ETFs
We’ve now covered how to select socially responsible ETFs. Let’s take a look at the benefits of investing in them.
- Aligning your investments to your values will allow you to sleep well, knowing that your money goes towards something positive.
- Numerous studies have shown that ESG-friendly businesses outperform their less sustainable counterparts in the long-term. In other words, making money is also a way to do good.
- You can support businesses that are leading the way to a more sustainable future.
As we get closer to an eco-conscious society, it is likely that green investments will become more popular and profitable.
For a better world, invest in socially responsible ETFs
There are many ETFs that are socially responsible and you should do your research before making any investment. You can make an informed decision on which fund will suit your needs by examining the various factors included in each fund. We are glad you found this article useful.