Want sustainable investments in your portfolio or 401k? Take the first steps here!
It’s (almost) tax time!
Now that I have your attention! Maybe it’s time to think about all your financial successes and woes for the year. It may also be the moment when you think, “This year I am going to align my values with my investments.”
Like many, you may have tried this before. And like many, you may have found its not as easy as it looks. If you have tried with no success, don’t despair! It isn’t all that difficult. I can get you going in three simple steps.
Step 1 – Know What Your Investments are Doing!
It is always better to understand what your investments are doing then not. Many people simply invest and forget. That can work, but as I note in my book Invest Like You Give a Damn, nurturing your investments is always better than ignoring them.
Whether you manage your investments yourself, or a manager does it for you, you need to stay on top of financial and sustainability performance if you wish to maximize returns.
Some people are surprised to learn that this applies equally to company 401ks. Even though your company may organize who manages your money, it is still your responsibility and your right to check out how it is being managed and demand great performance.
To complete this step, all you need to do is gather up all your investment reports. Once together, you need to look at the annual performance and see how you did.
Did you get 4% or 12%? What is the value of your stock appreciation (market value change) versus income from dividends?
But how do you know if you or your manager did well given the market context over the last year? To do this you need to compare your returns against a relevant benchmark investment.
For large capital equities, you can compare against S&P: U.S. Large-Cap Stocks. This benchmark works for large cap corporate equities, large cap mutual funds etc.. For more information on benchmarks check out this article from the independent investment information provider Morningstar.
Step 2 – Have a Discipline Approach to Monitoring Your Holdings
Remember when you were a kid and got your first bank account?
I do. Mine was a Bank of Montreal branch in Courtney, BC Canada! I think it is still there. Anyhow, I also remember how much fun it was to check my savings account balance every now and then, especially if it was going up!
Well, to nurture your investments you need to check your investments regularly. This can be hard to do on many levels. Two in particular stand out for most of us.
First, you need the discipline to check on a regular basis. But how often you may ask?
You can do it daily, but what with market gyrations and all, this may not be the best thing to do with your morning cuppa. So I recommend weekly or monthly, both work. The trick is to maintain the discipline to do it. Write in your calendar, put an automatic alarm on, do what it takes to get your attention for the five or ten minutes it will take to check. Also, try to do it on the same day, at about the same time, markets, like people have notable rhythms during the week and day.
The second level is that some of us fear our investment accounts going down. This is quite normal. I do to. Most of us only like to see our funds when the markets are up. But inevitably market go down. We need to get over this!
If you are like me, you gotta be brave. After a while, you will get used to the ups and the downs.
This is another reason why I recommend checking your investments regularly. You need to get familiar with them and comfortable with how market movements make individual investments take happy ups or dreaded downs.
Establishing a healthy investment psychology is very important. Why?
Because once you take emotion out of investment, like a calm mother with a jumpy child, you will be better able to nurture your holdings.
Unless we hit an abnormally bumpy market window (e.g. market correction), after six months of weekly checks, you will (mostly likely) be immune to market up and down worry.
Step Three – Check for Your Sustainable Investments in Your Portfolio
Next you need to decide how you want your values reflected in your investments. The first step here is to simply sit down with a paper and pen.
Good. Now write out a list of values you want to see shining in your investments.
Everything is valid. Don’t worry about being right. Only you know your own values. If you are concerned about climate change, animal welfare, public education or international development all are valid.
Just write the list out in your words. Later you can check them against the sustainable and responsible investment sector language to see what matches.
Now go back to your investment reports. Can you see if any of your stocks, bonds, mutual funds etc. reflect any of your values?
Unless you have done some SRI before, looking your values in your list of investments might not be all the revealing.
No worries. Just go to Morningstar.com. Morningstar is (again) an independent investment information provider. On the site you can see sustainability ratings for most funds and many companies for free with their basic package. Browse Morningstar and you will start to get an idea of how SRI may be reflected in your investments.
All Done… for now!
That’s it! Congrats. You’ve taken the first steps towards aligning your investments with your values.
Next week, I’ll give you some tips for assessing your investments from a sustainability perspective.
In the meantime, if you like to learn more about SRI, you can go to an earlier post I wrote which dives a bit deeper into SRI. Or take a listen to Mark Regier, noted SRI manager on a recent Sustainable Century Podcast.
If you need help or want to get ongoing insights and updates on The Sustainable Century drop me a line at firstname.lastname@example.org, or you can simply click on the subscribe button at the top right of the page.
Stay tuned for information on my upcoming DYI Sustainable and Responsible Investment on-line course (hint….click on the subscribe button to stay in touch!).
The information in this article and on The Sustainable Century website do not constitute investment advice. Do not make any investments without consulting a knowledgeable expert.