An Intro to "Worldview Investing": Put Your Money Behind Your Beliefs

It's easy to say "put your money where your mouth is," but how many of us REALLY think about the broader impacts that our retirement money is having on the current state of the world and the future? Earlier this week I discuss how vegans can go about investing with confidence by looking to filter out stocks and sectors that are in opposition to their worldview. However, this strategy of becoming overly selective to adhere to a worldview is not only limited to vegans.

Every major belief and worldview possesses a unique screening process when it comes to stocks...and each one is unique.

When it comes to wellness and animal concerns, Buddhists adhere to many of the same values as vegans but for slightly different reasons. Catholics may choose not to invest in companies that publicly support abortion or provide contraceptives to their employees. Many individuals avoid the stocks of companies that create, sell or support alcohol, tobacco, firearms, etc. -- essentially, there are dozens of unique worldviews out there, but how can one even begin to create a stock portfolio given these restrictions?

As I mentioned earlier this week, focus investing is an important strategy that should be utilized and understood by anyone with a restrictive worldview. However, that is only the beginning: deciding which stocks or sectors to embrace or avoid is a very important step that has a lot to do with your specific approach to SRI investing.

There are two ways to approach socially responsible investing. Neither is wrong or right, they are just different and all depend on the individual.

1) Affirmative, which allows you to be attracted to a company’s stock based on what they offer.

For example: encouraging corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. There’s ANOTHER acronym for this called ESG stocks – or Environmental & Social Governance stocks.

2) Negative, which is you being opposed to companies because of what they offer.

For instance, avoiding “Sin Stocks” which are those involved with alcohol, tobacco, gambling, pornography, weapons, contraception/abortion, fossil fuel production, food practices, and/or the military.

Once you have a good understanding of what you are looking for, then you can narrowing your specific search down to these major stock sectors. Some firms use different breakdowns, but for diversification purposes, it helps to breakout the sectors a bit further:

Information Technology: companies related to software, social media, websites, and app development. Far and away the least restrictive sector for those with particular worldviews because this sector is an important one for helping spread knowledge and their messages. (Examples: Facebook, Twitter, Uber, Amazon)

Telecom Services: companies related to phones and internet, which are also vital for the spread of information and also are not as limiting to various worldviews. (Examples: AT&T, Verizon, DirecTV, Netflix)

Financials: any and all financial institutions, credit cards, or mortgage institutions. This also includes investment banks, brokerage firms, insurance companies, credit cards, REITs, etc. Very limiting to some worldviews due to the sector's troubled past and dishonest actions. (Examples: Prudential, Citigroup, Goldman Sachs, Discover)

Consumer Discretionary: companies that provide goods and services deemed "in excess" of normal consumer needs. These would include luxury brands, automobiles, restaurants, non-grocery retailers, etc. (Examples: Tiffany's, General Motors, Starbucks, J.C. Penney)

Industrials: all companies that support infrastructure development and maintenance, plus all transportation companies such and railroads, airlines, shipping companies, trucking, etc. (Examples: Caterpillar, United Rentals, Delta Airlines, Union Pacific Railroad, Old Dominion)

Energy: anything from oil refiners to wind turbine companies; energy can be either carbon-based or green, but once again it depends on the investor. Carbon-free portfolios are becoming increasingly popular over the past two years. (Examples: Exxon-Mobile, Chevron, General Electric, Iberdrola)

Consumer Staples: companies that provide goods and services deemed necessary to consumers no matter what the economic conditions -- food, basic clothing, toiletries, gas, appliances, lower-end automobile makers, etc. Some green investors tend to stay away from staples because they imply that basic items that are cheap to produce are also of cheap quality and are filled with chemicals or unhealthy materials. (Examples: Procter & Gamble, Coca-Cola, Target)

Materials & Mining: companies involved in the extraction, creation, refining, or use of materials such as precious metals (gold, silver, etc.), energy products (coal), industrial metals (iron, copper, zinc) or in the development of materials (steel, lumber). (Examples: U.S. Steel Corp, Freeport-McMoRan)

Utilities: all electric companies or companies that produce energy for the use of the public via power grids. Also would include basic infrastructure support like waste elimination or garbage disposal. (Examples: Waste Management, General Electric)

Healthcare: includes all hospital stocks, disease research facilities, pharmaceutical developers and manufacturers, health insurance companies, orthopedics, medical device manufacturers, etc. (Examples: Pfizer, United Healthcare, St. Jude's Children's Hospitals)

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