Ethical investing is the practice of using an individual’s ethical principles which is the main filter used for the selection of securities investing. Ethical investing depends on the investor’s views. Ethical investing is occasionally used conversely with socially conscious investing. However, these socially conscious funds are known to have one predominant set of guidelines that are typically used to select the portfolio, whereas ethical investing brings about a more personalised result.
- Ethical investing is the practice of selecting investments base don ethical or moral principles
- Selecting investments based on ethics offers no guarantee of performance.
- Ethical investors typically avoid investments from sin stocks, companies involved with stigmatised activities, such as gambling, alcohol, smoking, or firearms.
- Analysing investments according to ethics should also include reviewing whether the company’s actions align with their commitment to ethics and their historical, current and projected performance
Ethical investing has the power to give the individual the ability to allocate capital to companies who have the same practices and values with their personal beliefs. Some of these beliefs can be established in religious, environmental or political precepts. This gives investors the opportunity to choose whether they want to eliminate specific industries or over-allocate to other sectors that are able to meet the individual’s ethical guidelines.
In addition to analysing investments using ethical standards, the historical, current, and projected performance of the investment should be scrutinised. Examining if the investment has the potential to reap significant returns and is sound, the review of a company’s history and finances is warranted in order to inspect if the investment is sound and has the capability to reap significant returns. The company’s commitment to ethical practices is also important to confirm.
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