My thoughts on ethical investing

You want to hear something crazy?

The most popular investing question I’m asked has nothing to do with making money.

True dinks.

The investing question my readers have asked me continuously for the past 16 years is:

“What ethical investing funds do you recommend?”

Now, truth be told, I don’t like any of the so-called ethical or responsible stock-picking funds. They always seem to be heavy on the woke-y marketing schtick, which they use to justify slugging their customers with high fees.

For me, it’s the investment equivalent of paying $12 for a kale smoothie, served with one of those ridiculous paper straws that go soggy after the third suck.  

Suck, suck, suck. (No juice.)

Thankfully, low-cost index investing has turned the ethical investing game on its head.

In fact, just last week Australia’s largest listed Aussie share fund, the $18 billion behemoth Vanguard Australian Share Index Fund (VAS.ASX), gained a woke sister-fund with the launch of the Vanguard Ethically Conscious Australian Shares Fund (VETH.ASX).

Let’s compare the pair.

Both funds charge rock-bottom fees and give investors exposure to the largest companies in Australia.

However, the Ethically Conscious Aussie Shares Fund filters out companies from the index that are involved in fossil fuels, nuclear power, alcohol, tobacco, gambling, weapons and adult entertainment. 

It also filters out companies that have been involved in ‘severe controversies’ relating to labour rights, human rights, environment, corruption and the like. A good example would be Dreamworld’s parent company, Ardent Leisure, which was found guilty and fined over the 2016 water-rapid ride tragedy that killed four people.

(And while Vanguard may be the world’s largest index manager, it’s not the only player: BetaShares, State Street, and VanEck also have low-cost local and international ethical investment offerings worthy of a look.)

Ethical investing in Australia is so hot right now, and we’re recognised as some of the wokest investors in the world. However, know this: your super money is not automatically invested in ethical options straight off the bat.

Investment house SuperRatings says that, while there has been an explosion of low-cost ethical options available in super funds, as a general rule they are not the default investment option most people are put into.

So, if you’re passionate about investing your super in businesses that support the future, ask your super fund what ethical index options they offer … and ideally choose low-cost offerings that don’t suck.

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.