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How to Become a Conscious Investor

date November 16, 2021 time 5 min read 2917 views

We are all becoming more aware of the impact we have on our world. We’ve adjusted our diets, changed the way we travel, and recycle more than ever before. But how about becoming a conscious investor, where your investments and finances match your values? Intrigued? Let’s jump in.

What is conscious investing?

Conscious investing is a philosophical approach where investment decisions are made to align with your values to achieve financial gain and social impact. While investing is typically about profit, social impact is also important. Conscious investors invest with the bigger picture in mind.

Investing in environmentally-friendly companies and projects is a big part of conscious investing – but not the whole picture.
Investing in environmentally-friendly companies and projects is a big part of conscious investing – but not the whole picture. (Source: Pixabay)

Investors use a set of environmental, social, and corporate governance (ESG) criteria to choose which companies to invest in. You can invest in individual companies with good social values or through socially conscious mutual or exchange-traded funds (ETFs).

While conscious investing emphasizes the avoidance of harm by investing in companies with shared values, its subsets have some distinct features of their own. For instance, impact investing seeks positive impacts by investing in companies that create measurable positive impacts on the community and environment.

Socially conscious investing, as it’s also known, isn’t necessarily just about being green. It’s more about investing with your values in mind. You may choose to only invest in companies that subscribe to your views on gender equality, environmental protection, and poverty alleviation and support access to education, clean water, and healthcare.

For example, investing in microfinance banks that give loans to small business owners in underserved communities. Or funding initiatives that empower women in various fields.

How to become a conscious investor

Have you ever heard about how your enneagram core motivations and personality type affect how you treat money, you can explore to see how it link to financial decisions sparked some epiphanies about your habits and patterns. A conscious investor is careful about where they’re investing and how it will impact society at large. Here are some steps you can take to ensure your investment strategy aligns with your values:

Define your values and take action

You cannot be a conscious investor without having a clearly defined set of values that matter to you. Identify what you believe in and what you care about so that you can consciously invest in their realization.

Conscious investing aligns your investments with your wider values in life.
Conscious investing aligns your investments with your wider values in life. (Source: Pixabay)

You must also take action by auditing your investments and properties. Determine those that don’t support your values and terminate them. Then, seek out new opportunities to support causes you believe in.

Understand the different types of conscious investing 

There are four main types of conscious investing:

  • Responsible investing: An approach where investors terminate investments in companies commonly perceived as harmful to society. For example, guns and tobacco manufacturers.
  • Sustainable investing: Investors use a set of environmental, social, and corporate governance (ESG) criteria to choose which companies to invest in. Investors consider the company’s relationship with nature, its communities, and its leadership.
  • Triple-bottom line investing: This approach involves investing in companies that aim to impact people, planet, and generate profit—for example, Unilever, which aims to reuse 100% of plastic packaging by 2025.
  • Impact investing: An approach that targets companies that produce products and services that directly address social and environmental challenges. It seeks positive impacts by using the power of capital for the greater good.

Understanding the different types of conscious investing will help you determine the type of investor you want to be.

Ensure a diversified portfolio within your values

Now that you know more about the main types of conscious investing, the next step is to decide the type of investor you are and choose the right companies to invest in.

You may be tempted to choose a specific company that embodies your values and throw all your money at them. Don’t. As a conscious investor, you should consider that conscious investments are still investments and should be treated as such.

Cryptocurrency could also be regarded as conscious investments, given its role in decentralizing finance.
Cryptocurrency could also be regarded as conscious investments, given its role in decentralizing finance. (Source: Pixabay)

Ensure you do your due diligence on the company of interest, understand the types of investment risk involved, and weigh the potential for return on your investment. Luckily, 91 percent of conscious investors are reportedly outperforming or are in line with their financial performance expectations. 

It’s safe to say conscious investing pays. Not without its risks, of course. This is why you must assess your appetite for investment risk and ensure that you have your finances in order before venturing into it. When it comes to investing, risk and reward go hand-in-hand.

One of the wisest decisions you can make as a conscious investor is to diversify your investments through socially conscious mutual funds or exchange-traded funds (ETFs). 

Having a diversified portfolio significantly reduces your investment risk. For instance, a collapse in one sector won’t affect your entire portfolio because your fund is broadly invested across multiple market sectors, assets, and regions.

Remember, the importance of investment portfolio management as a safety net cannot be overemphasized when it comes to investments.

Measure beyond financial returns

As with all investments, conscious investors can fall into the trap of obsessing over the potential financial returns a company of interest offers. But you need to remember that conscious investing takes the paradigm beyond money. It’s the idea that wealth is more than just money.

With your values at the forefront of your investing decisions, you may be inclined to take on an investment that offers slightly lower returns when compared to non-conscious investments for the greater good. 

The good news, however, is that the difference isn’t very significant. According to a study by the University of California, the median impact fund had a median internal rate of return of 6.4%, compared to 7.4% from non-impact seeking funds.

When evaluating potential investments, conscious investors’ expectations are determined by their values. Think about the social causes you’re passionate about and the impacts you want the companies you want to invest in to make.

Using MyConstant as an example, our peer to peer lending for bad credit platform offers excellent interest rates on investments, secures lending with collateral, protects funds, and doesn’t require a credit check for applicants.

Many Americans aren’t able to get funding for their businesses or projects because of their bad credit history. They are prevented from gaining equal access to funds that can help their businesses grow. If you’re passionate about helping underserved communities, investing with MyConstant is a conscious way of helping those communities thrive and start compound interest investments.

Conscious investing is a deeply personal approach to investing, and it’s not a one-size-fits-all venture. These tips provided will help you make the best investment decision.

Invest consciously with MyConstant

At MyConstant, we have a wide range of products, and the more conservative types among you will be pleased to know we have a proud record of no investor losing their initial investment to date. You can lend money online with us or deposit your USD.

Also, you can deposit your crypto in our multi-cryptocurrency wallet (where you’ll earn up to 4% for stablecoins) or take your crypto even further by lending it out and earning interest on crypto up to 7%.

Benefits include:

  • No fees for USD investments
  • Anytime withdrawals
  • Minimum investment just $10
  • Store and borrow against over 70+ different cryptocurrencies such as qtum coin, BNB, bitcoin, etc.
  • No maximum investment limit

Sound interesting? Sign up for a free account today and start investing.

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George Schooling

George Schooling

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