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Is Your Money Aligned With Your Values?

Do you prefer organic food? Do you recycle? Do you believe in fair labor standards? Great! But what if I told you that your 401k and IRA investments are running contrary to the values that are important to you?

The largest stock mutual funds in America include companies that sell guns and tobacco, operate private prisons and nuclear power, and drill for oil and gas that contribute to climate change. It is highly probable you own one or several of these mutual funds through your 401k or IRA. I am not saying there’s anything wrong with that; however, I am here to raise your awareness. If this bothers you, you can choose to divest away from these companies.

I just read a disturbing article in Bloomberg Businessweek that tells the story of women in Asia who have suffered miscarriages and birth defects. They all worked in semiconductor companies and were unknowingly exposed to highly toxic chemicals. Would we want to be a shareholder of these kinds of companies who have minimal regard for its employees?

Fortunately, sustainable, responsible and impact-investing funds have taken off in the last several years. From 2014 to 2016, ethical investing enjoyed a growth rate of more than 33%, increasing from $6.57 trillion in 2014. More mutual fund families are offering socially-responsible funds that any individual can have access to.

Some funds screen away the “sin” companies. A negatively-screened fund often removes companies involved in weapons, tobacco, alcohol, nuclear power, and adult entertainment. Other funds go further by seeking those who are trying to make a positive impact in society. It selects companies that meet specific criteria on environmental, social, and governance factors, like, for example: commitment to higher labor standards; clean supply chain; board and management diversity; and lower carbon emissions.

Where can you find these green funds? ETFdb.com has a list socially-responsible ETFs. You’ll be amazed at the various options that are available. You can choose an ETF that is fossil-fuel free, one that adheres to Catholic values — or another that follows best practices for hiring candidates with disabilities! For a more comprehensive list of socially-responsible funds, visit The Forum on Sustainable and Responsible Investment.

Are you passionate about going fossil-fuel free? This cool website – fossilfreefunds.org, can reveal all the fossil fuel companies owned by your 401k or IRA mutual fund.

What is the financial trade-off for doing impact investing? Three years ago, I would have told a client that they might have to delay retirement by a couple of years. But recent studies by Morgan Stanley, Deutsche Bank and TIAA-CREF reveal that there is no statistical difference between socially-responsible funds and traditional investments. In fact, in some cases, they performed better. So, there may not even be a financial trade-off in doing good!

If you’d like to align your values with all aspects of your life — including your money — consider moving a part of your 401k and IRA investments to sustainable, responsible, and impact-investing funds. If you’re not sure how to go about it, seek expert advice. Look for a CFA charterholder who is knowledgeable and passionate in this topic.

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Alvin Carlos, CFA, CFP®

About Alvin Carlos, CFA, CFP®

Alvin Carlos, CFA, CFP® is passionate about helping middle class professionals make smarter financial decisions. He is the CEO of District Capital Management, a financial planning and investment management firm for the everyday people. Alvin is a CERTIFIED FINANCIAL PLANNER™ practitioner and has a Masters degree in International Relations from SAIS-Johns Hopkins. In his spare time, Alvin enjoys swing dancing and Ultimate Frisbee. He also volunteers for Catholic Charities’ new Financial Stability Network, which helps low-income folks with their finances.

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