A Portfolio Built for You Rather than the 1%
A Portfolio Built for You Rather than the 1%
Many people may already be investing, even if they do not think of themselves as investors. A workplace retirement plan, an IRA, a brokerage account, or a savings strategy connected to market-based investments may create exposure to public markets. Mutual funds and ETFs are commonly used investment vehicles, and the U.S. Securities and Exchange Commission notes that both are often used by investors saving for retirement and other financial goals.
That exposure can be helpful. It can also be worth understanding.
Why Your Portfolio May Deserve a Closer Look
Many investors may own funds without fully reviewing what those funds hold.
As the SEC explains, an index fund is a mutual fund or ETF that seeks to track the returns of a market index. The SEC also notes that indexes may measure the performance of a basket of securities, such as stocks or bonds.
The S&P 500 is one widely referenced example. According to S&P Dow Jones Indices, the S&P 500 includes 500 leading companies and covers approximately 80% of available U.S. market capitalization.
That may provide broad exposure. It may also mean you are invested in many companies at once, including companies you may not have personally chosen.
For some investors, that may feel acceptable. For others, it may raise a deeper question: Do I know what I own? And just as importantly: Does what I own reflect what I value?
How to Invest to Your Values
If you have ever searched for how to invest in your values, you may already be asking a more intentional question about money.
You may not only be asking what your portfolio could earn. You may also be asking what your portfolio could support. We believe this can be an important shift.
A values-aligned investment conversation may include questions such as:
- What industries do I want to support?
- What business practices concern me?
- What risks am I willing to accept?
- What tradeoffs may be involved?
- How can my investment choices align with my goals, time horizon, and personal priorities?
These questions do not guarantee better outcomes. They do not remove market risk. They may, however, create more awareness around how your capital is allocated.
The Limits of “Set It and Forget It”
A simple investment approach may feel appealing. Many people may prefer a strategy that requires minimal time, minimal research, and limited day-to-day decision-making. That can be understandable.
However, we believe convenience should not prevent awareness. If a fund owns hundreds of companies, the investor may want to understand the general criteria behind those holdings.
The SEC states that mutual funds and ETFs provide documents such as prospectuses and shareholder reports, which can help investors learn more about objectives, fees, risks, and holdings.
That information may not answer every values-based question. But it can potentially be a starting point.
What Values-Based Investing May Mean
Values-based investing may be described in several ways. Some investors may call it sustainable investing. Others may refer to ESG investing, socially responsible investing, impact investing, or faith-based investing.
The SEC describes ESG funds as funds that focus on environmental, social, and governance principles, and notes that ESG funds may use different strategies, criteria, and approaches.
Because approaches can differ, we believe investors should be cautious about assuming that every values-based fund reflects their specific values.
One fund may emphasize environmental factors. Another may emphasize governance practices. Another may screen out certain industries. Another may seek companies that appear to meet certain social or sustainability criteria. As we understand it, the label alone may not be enough. The details may matter.
A Custom Portfolio May Allow More Intention
A custom-built portfolio may potentially give investors more ability to consider what they want to include and what they may prefer to avoid. This does not mean every investor needs customization. It also does not mean a customized approach is appropriate for everyone.
A custom portfolio may involve additional complexity, costs, tax considerations, diversification questions, and ongoing monitoring. Still, for some investors, it may provide a more intentional framework.
Instead of simply accepting broad exposure, you may be able to ask:
- Does this company align with my priorities?
- Does this investment fit my risk tolerance?
- Does this strategy support my long-term financial plan?
- Does this portfolio reflect what I want my money connected to?
We believe those questions may help investors move from passive participation toward more conscious ownership.
Values and Performance Both Matter
Investing to your values should not mean ignoring financial fundamentals. We believe values-based investing should still consider risk, diversification, fees, liquidity, taxes, time horizon, and overall financial planning needs.
The SEC encourages investors considering ESG funds to ask questions about goals, strategies, holdings, fees, and risks.
That guidance may be especially useful because values-based strategies can vary widely.
One investor may be comfortable with certain tradeoffs. Another may not. One investor may prioritize climate-related concerns. Another may prioritize labor practices, community impact, corporate governance, or other personal considerations. A thoughtful process may help bring those priorities into the open.
Why Awareness Can Be Powerful
We believe many people may feel disconnected from their investments because the process can seem abstract. Money goes into an account. Funds are selected. Statements arrive. Balances move.
But behind those numbers, there may be real companies, real business models, and real-world outcomes. That does not mean an investor is responsible for everything a company does. It does mean an investor may choose to become more informed. And for some people, that awareness may feel empowering.
How to Begin
If you are wondering how to invest to your values, you may not need to overhaul everything at once.
A more measured approach may include:
- Reviewing your current holdings.
- Reading fund documents.
- Understanding your retirement plan options.
- Identifying industries or practices you may want to avoid.
- Clarifying the causes or themes you may want to support.
- Speaking with a financial advisor about risks, costs, and tradeoffs.
These steps may help you make more informed decisions. They may also help you understand whether a broad index strategy, an ESG fund, a custom portfolio, or another approach may be more appropriate for your situation.
A Portfolio Built for You
We believe your portfolio can potentially reflect more than market exposure. It may also reflect your priorities, your concerns, and your hopes for the future.
That does not require perfection. It does require attention. It may require asking better questions. It may require looking under the hood. And it may require working with an advisor who understands both financial planning and values-aligned investing.
A portfolio built for you may not be about rejecting the market. It may be about participating with more intention. It may be about understanding what you own. It may be about aligning your capital with your financial goals and personal values.
Because when your money is invested, it may be connected to more than numbers on a screen. It may be connected to the kind of future you want to help build.
If you are ready to explore how your finances may support your values, you can schedule a complimentary evaluation call with a financial advisor at www.holisticfinance.com.
Disclosures
Advisory services are offered through Holistic Finance LLC, an SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. This article is for informational and educational purposes only and does not constitute investment, tax, or legal advice. References to specific financial institutions are for example purposes only and do not constitute endorsements or recommendations. Incorporating a social objective or other non-financial objective into investment decisions will result in investment recommendations that are not only focused on maximizing a financial return.
