There’s value investing and then there’s values-based investing.
Value investing is a strategy that focuses on finding and buying stocks that are priced less than they’re worth.
Values-based investing, on the other hand, is an approach where investors consider the potential social and environmental effects of an investment instead of simply weighing the possible monetary benefits.
This strategy is not just about seeking financial returns. It's also about making a positive impact on the world.
Values-based investing: 3 methods to know
There are 3 methods you can explore when investing with your personal values in mind. Learn all about them below.
- Impact investing
This involves choosing investments that create a direct and positive impact on a specific cause.
- Environmental, Social, and Governance (ESG) investing
This approach integrates any or all of the 3 ESG factors into investing decisions. ESG investors assess the effects of an investment on the environment, and look at the impact on people inside and outside of the involved companies or entities.
- Socially Responsible Investing (SRI)
In this method, investors weigh certain values or ethical considerations when choosing investments. One example is avoiding companies that trade or manufacture weapons.
Should you practice values-based investing?
Investing decisions are as personal as your own unique values. It’s up to you to decide what to invest in and what goes into making those choices.
If you’d like to put your money to work while strongly supporting your principles, then this strategy might be for you. It may also allow you to reach for life goals and philanthropic commitments at the same time.
Things to remember
To invest based on your values, you’ll have to study an extra set of factors on top of the usual things investors must consider.
Take note that your beliefs likely differ from others'. You might have to set your own standards when following this approach.
Then, you’ll need to take time to figure out whether an investment suits your criteria. Because of this, values-based investing may significantly limit the number of products you can pick from.
Remember that it's always important to factor in your risk profile and money goals no matter the strategy you’ll choose.
