If you’re like many investors, you might be questioning your portfolio as much lately as the markets have been. With volatility on an all-time high and lock-in periods for fund managers that are no longer available to new investors, it’s enough to make even long-term holders ask: Is this the right time to invest?
One way to simplify things is to build a sustainable portfolio—a collection of investments that supports your long-term goals while minimizing risk and volatility. What’s more, sustaining your investments isn’t as hard as you might think.
Here are some simple tips for building a sustainable portfolio that works for the betterment of humankind.
Know Your Values
Investment ethics are the guiding principles that determine which investments you make and how you manage them. Knowing these values will help you decide which investments suit you best. It can also help you avoid investments that don’t align with your long-term financial goals.
For example, you also want to avoid investing in companies that stand to profit off of the suffering of others. This could mean avoiding companies that rely on harmful or unethical practices or companies that fall foul of various ethical issues.
Instead, you can focus on companies that positively impact humankind over the long term. This could mean investing in companies that make a positive environmental impact, companies that employ a certain number of people, or other values that fit your ethical values. However, note that if you want to make investments that might prove valuable during your retirement, you may want to steer clear of investments that focus on immediate growth (which brings us to our next point).
Outline Your Financial Objectives
Investments are only worth anything if you have a clear vision of what you want out of your financial life. Investors with overly lofty financial goals are more likely to experience severe losses. If your goals are too broad or too far off in the future, it’s easy to get overwhelmed and miss the mark.
At the same time, you don’t want to set financial goals that are too narrow or too close to home. If your financial goals are related to your current needs, like paying off your mortgage or making sure you can provide for your family, you might miss out on opportunities to grow your money.
Ultimately, once you have your financial objectives in mind, you can identify the investments that best align with your desired outcomes. If you’re investing for your own retirement, consider setting a financial objective of saving enough to live comfortably for several years in retirement. If you’re investing for your child’s education, consider setting a financial objective of helping them pay for school.
Do Your Research
While knowing your ethical values and setting financial objectives is important, the best way to sustain a sustainable portfolio is to do some research. Investing is tricky business, and it’s quite easy to get lured into high-volatility investments or get swept up in short-term price movements. When you’re researching your options, consider these things:
- Risk: How much risk are you comfortable with? If you’re investing for your child’s future, you might be willing to take on a little bit more risk, while someone with a more conservative investment objective might prefer lower risk.
- Return: What kind of return are you looking for? Are you hoping to earn enough money to fund your retirement? How much money do you need to live off comfortably?
Consider an ETF
Investment funds are a popular way to diversify your portfolio. While there are many different kinds of investment funds, the most popular are exchange-traded funds (ETFs). With ETFs, you purchase a basket of different stocks and assets, like a suite of index funds. The big upside to ETFs is that they provide exposure to thousands of assets without the hassle of buying and selling individual stocks. That means you can save a lot of time and avoid the risk of investing in the wrong stocks.
The biggest downside of ETFs is that they typically track an index. Because they follow the same index, they tend to be very similar. This can be a good thing, as it means they’re likely to provide consistent returns over time. The problem with this is that they also tend to be very similar in terms of risks. That means they’re often not a good fit for investors looking for more active investment management.
Talk to an Investment Broker
Investment brokers are your go-to source for research and portfolio management. They offer customized recommendations and management services across various fields ranging from index funds and ETFs.
A broker can help you select a portfolio based on your financial objectives, risk tolerance, and desired investment return. Keep in mind that brokers typically charge a fee for their services, but having one person manage your entire portfolio is worth it.
Read Companies Sustainability Reports
Many companies now make it a point to publish information on how sustainable they are to humankind. Investors can access these reports online and use them to gauge how sustainable any given company is.
So, when researching companies, look for those that have published reports with information on their sustainability. This is a great way to determine whether a particular company is in line with your ethical values.
You can also use these reports to see how sustainable a company’s operations are and how much they contribute to humankind. It’s important to remember that while a company’s sustainability report is good to start off, it’s even better to keep up with these reports. That way, you can make sure your investments are as sustainable as possible.
In Conclusion
Investing in any business is risky, but it does offer a high reward. However, you need to assess your financial situation and learn from yours or other investors’ mistakes if you want to maximize your investment return.
As with anything else in life, it takes time and effort to build a solid foundation for your future financial independence. But once it’s in place, staying the course becomes that much easier. With these tips in mind, you can make sure your investments are sustainable and in line with your values and ambitions for humankind.
