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Invest Decision, Saving Tips

Term Life Insurance Vs. Mortgage Insurance

So you have made the biggest investment of your life, i.e., the home of your dream. You might be wondering the best approach that you can opt to protect your investment when you are not here. Well, insurance will be the first way that will come into your mind. Now, the vital thing that comes into play is what type of insurance you should go for, term life insurance or mortgage insurance. There are some important differences between these two that people are not aware. Here you will find the difference between them so that you can you can pick the policy according to your needs. For instance, you can take this quiz by to know advantages and disadvantages of term life insurance for your children, mortgage insurance for homeowners and which policy will be the best for you.

Mortgage insurance pays the amount of your mortgage to the bank if the person who is listed on the mortgage leaves the world. In this way, the liability of the debt is not left on your family. Now, this option would appear convenient to you, but this convenience comes at some cost. The thing that you have to remember is that you are not going to be covered at the time of claim even if you are paying the premiums. Also, if you have some health issues at the time of applying and if you don’t disclose it, then your claim will be rejected. Well, there is no doubt that there are other financial obligations that need to be considered and having much money to fulfill the current needs gives peace of mind. But you should also know about some other options when you can’t meet your financial obligations.

Term life insurance often require a detailed screening as you have to provide your doctor’s contact details and have to share your urine as well as a blood sample. This type of insurance is attached to you rather than your debt. The rates on term life insurance would be much lower as compared to the mortgage insurance policy. Term life insurance is more affordable and gives a guarantee with your coverage.

If you already have term life insurance then applying for mortgage insurance will become easy for you. You just need to contact the insurance provider if you need it. You can visit if you want to take more life insurance quizzes. You can browse the site to explore many more interesting quizzes.

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What is Life Insurance? How to Find the Best Policies?

Are you new to life insurance? You must learn how it works to choose the best coverage. A life insurance policy is a contract with a particular insurance company, now most people take the life insurance policy to receive huge benefits in future. In exchange for premium payments, the company provides a great sum of payment; it is also called as a death benefit, to beneficiaries upon the insured’s death.

Usually, life insurance policies are chosen based on the needs of the individual as well as requirements of the owner. This cover generally provides protection for a respective period of time. Of course, the permanent insurance offers universal life coverage. However, the death benefits from all types of life insurance policies are income tax-free. When it comes to choosing life insurance policies you have different choices some common types include Universal life insurance, Term life insurance, and Whole life insurance.

As individuals needs vary, every applicant will have their own requirements. Most of the insurance companies offer the best ranges of insurance plans that talk to you individually as well as they also give you the most suitable options that perfectly fit your requirement. However, finding your way through the life insurance policies can be a difficult task so you need to get ware of different policies available in the market. It is essential to analyze the policy that you have decided to choose and also consider whether it fits your budget or not.

In general, life insurance has evolved from a luxury thing to necessity. It is now an integral component you must have. When it comes it comes to choosing life insurance coverage, most people experience a lot of issues. The biggest challenges pertaining to Life Insurance is related to selecting the right insurance cover because now companies offer many different insurance options. Basically, the right selection of insurance cover wouldn’t be hard for people who are familiar with the terms and conditions but it would be really difficult for the people who are not aware of the terms and them to get confused with the new rules. You should visit Health to find more details about different life insurance policies.

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Warrants exercised by Warren Buffett’s Berkshire Hathaway for Purchasing 700 million shares of Bank of America

Bank of America Corporation’s shares BAC, -0.25% rose 1% in premarket trade recently after Warren Berkshire announced that it will exercise the warrants to purchase 700 million shares of the bank’s common stock.

Warrants exercised by Warren Buffett’s Berkshire Hathaway for purchasing 700 million shares of the Bank of America recently. It happened because the America’s dividend increase took place. The prices of exercising these warrants would be around $7.14 per share. This is 71% below the closing price of the previous day, where price was $24.32. so, the 700 million shares of Bank of America would simply represent about 7.0% of the outstanding shares. After all this was said, it is believed that Berkshire would probably become the largest shareholder in the shares of Bank of America.  

Berkshire announced that it will utilize its $5 billion worth of 6% preferred Bank of America stock as deliberation to purchase the common stock. The warrants to buy the common stocks were received by Berkshire back in 2011 when it purchased the preferred stock. The stock has rallied 10.1% until date while the financial select sector ETF of SPDR has dipped down on 6.2% and the S&P 500 has gained 8.1%.

It seem that this change in the prices and the shares of Bank of America would definitely make Berkshire one of the top shareholders in the shares. All the warrants has been received and the benefits are availed.

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3 Ways to Pay for an Accounting Degree Without a Student Loan

Paying for college is not easy, and more than half of the population takes out a student loan to pay for school. Approximately 70 percent of all college students in the United States take out a loan, and the total student debt amounts to roughly $1.4 trillion. While these student loan statistics may imply that getting a student loan is normal, getting buried in your educational debts may not be the best choice.

For those who would rather not be weighed down by their debts for years to come, here are three alternatives worth considering:

Think Outside the Box – Consider Online Educational Institutions

With the yearly increase of college tuition, you should be strategic in choosing the institution you are going to attend. Public colleges are cheaper than private universities. Another thing most students forget is this that they have the option to study online.

Distance learning is the new way to get a higher education, and a university offering this option is a more cost-friendly choice. Many institutions, both private and public, are offering 100 percent online courses at a fraction of the price of a traditional degree. Maryville’s Bachelor’s in Accounting is a degree you can take fully online. As for those who would rather attend a public university, there are universities participating in distance learning education like the University of Alabama at Birmingham. UAB offers a Bachelor’s in Accounting online, too.

Federal Work – Study Programs

For those who want help in paying their school fees, the government has programs in place designed to help out. Part-time and full-time students can get a part-time job from participating educational institutions to help out with their tuition.

The Federal Work-Study program provides opportunities for those who demonstrate financial need. The best way to avail of this is to fill out the Free Application for Federal Student Aid, indicating you are interested in student employment.

Look for an Employer Who Will Help Put You Through College

Working while studying may be challenging, but it can be rewarding, too – especially if you have an employer who will support you through school. These days, there are several companies with existing programs to help their employees finish college or pursue a higher degree.

Many employers offer a college tuition reimbursement program because it’s a valuable investment for them. The health insurance company Cigna, and the popular international coffee chain Starbucks are just two companies offering employer tuition assistance programs.

Paying for a college education may be difficult and challenging, but with the right mindset and determination, you have several options if you truly want to study.

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Why You Should Invest in Index Funds

For most investors, a portfolio of index funds is more than enough to meet their long-term financial goals. Index funds are some of the most popular, readily available, and valuable investments on the stock market. They’re also very affordable and easy to access. Still, many people aren’t exactly clear on how they work or how to buy them.

I’ve been getting a LOT of questions on index funds lately, so I wanted to explain what they are and how they work, so you can see what an awesome investment these are for millennials!

What exactly are index funds?

To understand index funds, you only need to understand what the words “index” and “fund” mean.

A fund is a collection of related investments, usually stocks, that trade as a single unit. A fund manager selects the securities that are to make up the fund, bundles them together into a single package called a fund, and then sells shares of that fund to investors.

An index fund is a collection of investments that represent an index. An index is a measure of something. In the stock market, an index usually represents a particular industry, geographical region, or type of investment. For example, you can buy an index fund that mimics the oil and gas industry, or one that follows the US stock market, or one consisting entirely of bonds. Index funds contain investment securities in the same proportion that they are represented by size in the stock market, so the largest company on the US stock market would also be the largest holding inside a US stock index fund.

Index funds are typically mutual funds and exchange traded funds (ETFs). Both of these are managed by a fund manager that you pay a small fee to for his trouble of selecting the investments and managing the fund. Mutual funds charge higher fees than ETFs, but are easier to access because they’re typically sold by your bank, have very low entrance requirements (you can get started with as little as $25!), and don’t require any ongoing management effort on your part. ETFs are much cheaper than mutual funds in terms of fees, but you need a brokerage account to buy them, which usually requires at least a $1,000 deposit. You’ll also have to take a bigger role in managing your ETFs portfolio than you would a mutual fund.

Why are index funds a good investment?

Index funds are a cheap way to diversify your portfolio, which can reduce your investment risk and increase your exposure to the whole market. Not only does this protect your portfolio from major market swings, it can also increase your investment income.

Think about it this way: if you have $1,000 to invest, you can buy 1 share of Google or you can buy a small piece of 500 different US companies, including Google, by buying shares in an ETF representing the S&P 500 index. Which would you choose?

Google isn’t a bad investment, but you are putting all your eggs in one basket. If the stock goes down, your whole portfolio goes down. If you want to buy a few shares of something else, you’d have to sell your entire holding in Google, pay the trading commissions, and then reinvest in something new. If you own an ETF of the S&P 500, if Google goes down in price, your investment might dip a little, or you might not even notice it at all. In fact, if the other holdings in the ETF are doing well, you could still see your investment increase in value, even if Google and few others are having a bad day.

Google doesn’t pay a dividend, but many stocks do. When you own an index fund, you will receive dividend payouts from these companies in the form of a dividend from the ETF. Many ETFs pay out quarterly, but a few pay out monthly. If you’re looking to increase your passive income, slow and steady investing in index funds is an excellent way to do it.

Index fund investing is EASY

The beauty of investing in index funds is you probably only need to own 2 or 3 to have a fully diversified investment portfolio. It really is that easy. All you need is a broad stock market fund and a bond fund and you’re done.

However, if you want to take a more active role in managing your portfolio, you can diversify further with more specific index funds. You might choose to add an index fund representing emerging markets to your portfolio, or one containing only socially responsible, green, or ethical investments. Truthfully, there are index funds as broad or as specific as you want, which means you still have a lot of flexibility over the asset allocation in your portfolio even though you are not holding individual stocks.

If you want to buy individual stocks, you still can. I personally love building the foundation of my investment portfolio around core ETFs, and then investing in individual companies I find interesting or exciting to further diversify my portfolio. This protects my overall wealth from dramatic market fluctuations, while still letting me enjoy a more hands-on active trading experience.

Do you invest in index funds? What’s your experience so far?

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Your Top 5 Investing Questions Answered

Most millennials are not investing. In fact, as many as 80% of millennials are staying out of the stock market, citing both lack of funds and lack of understanding about how investing works as their reasons for staying put on the sidelines. However, failing to invest, especially when your young, means missing out on decades of returns. This is why I say not investing is the most expensive mistake you can make: choosing to stash your cash in a savings account instead of the stock market can cost you six- or –seven figures over your lifetime.

In other words, you can’t afford not to invest.

Nevertheless, you might still be hesitating because you have questions about what exactly investing is and how to get started. Check out my answers below to the 5 most common investing questions I hear all the time!

What exactly is investing?

Investing means using your money to make more money. Anything that earns you a return on your capital is an investment. Technically savings accounts are a type of investment because you earn interest on your deposit. However, because interest rates are so low right now, a savings account is not enough to grow your wealth over the long-term. In fact, if you’re putting your money in a savings account, it will actually be worth less over the long-term because interest rates are less than inflation. This is true of most GICs as well. For this reason, the best places to invest to actually grow your wealth are mutual funds, ETFs, or stocks.

How do I get started investing?

It’s never been easier or more affordable to access the stock market, because you can do all of your money management online. In the past, investors had to work through a broker in person at their bank or over the phone, but now you can buy and sell investments with the click of a mouse.

Setting up a brokerage account takes about 1 week and requires an online application and cheque to seed the account with some starter funds. After that, you’re good to go.

How much money do I need to get started investing?

Most people are surprised how little it takes to get started investing in the stock market. You can begin investing mutual funds with as little as $25 or $50. You can start investing at with as little as $100. Or you can open a brokerage account with between $1,000 and $5,000. The more you have to invest, the sooner you’ll start seeing a real return on your money.

I suggest saving up $1,000 to start investing. You can start with more, but since timing in the market matters more than market timing, it’s not worth the opportunity cost of waiting until you have $5,000 or $10,000 in the bank to jump into the stock market. Besides, it’s better to learn how to invest and take your first risks with a small amount of money rather than your life savings. Remember, investing well is a lifetime skill, so you have time to take it slow!

What should I invest in?

What you should invest in depends on two things: your risk tolerance and your investment knowledge – and both of these are likely to change over time.

As a new, inexperienced investor, your primary objectives should be getting in the habit of investing, learning the language of finance, and getting used to watching the value of your portfolio fluctuate with the market. Index funds, such as mutual funds or ETFs, are best for this.

RELATED POST: Why You Should Invest in Index Funds

When it comes to selecting your investments, you may want to get help from a financial advisor, but there are some important questions you need to ask before you trust anyone with your money. ATB Investor Services has four key questions everyone should ask their financial advisor regardless of where they bank:

  • How can I be confident you’re going to act in my best interest?
  • How are you compensated?
  • How will I be charged?
  • What is your (and your firm’s) investment philosophy?

Since fees can drastically reduce your returns on your portfolio, it’s vital that you know how much you’re being charged and how. Recently, many of Canadians financial institutions have come under fire for focusing on selling financial products rather than helping clients reach their financial goals. Being able to ask the right questions is integral to ensuring your best interests are being looked after.

For most investors, index funds will be all they need, but if you enjoy managing your portfolio and want to take a more active role in trading, you can start buying individual stocks. Investing in common stocks requires a greater time and skill because you have to make the effort to research and evaluate different investments, determine how they fit into your overall portfolio asset allocation and make decisions about when to buy and sell them to meet your investment goals. Trading common stocks comes with higher income potential, but it also comes with increased risks. You have to have the time and skills to manage individual securities in your portfolio. Otherwise, the risks far outweigh any potential rewards.

Where can I learn more about investing?

Something I always tell millennials eager to jump into the stock market without taking the time to seriously learn about investing is:

If you don’t know what you’re doing, you’re not investing. You’re gambling.

Many people think investing in the stock market is “risky”, but that’s only true if you don’t know what you’re doing and you don’t have a plan. Knowledgeable and experienced investors can expect to grow their wealth consistently in the stock market, unskilled investors making guesses are unlikely to have the same returns.

To really profit in the stock market, you have to invest as much time in your education as you do money in your brokerage account. Some of the best places to learn about investing are:

  • Personal finance blogs (like this one!)
  • Directly from your brokerage or bank – check out ATB Financial to ask questions directly, check out InvestU, or learn more about investing with ATB
  • Personal finance books
  • Websites like Google Finance, Investopedia, and Marketwatch

The more you learn about investing, the more confident you’ll feel managing your own portfolio, and the more you’ll be able to earn in the stock market. Happy investing!

Have more questions about investing? Tune into ATB’s Facebook Live event on May 25th at 12:30 pm MST with President of ATB Investor Services, Chris Turchansky!

This post was sponsored by ATB Investor Services The views and opinions expressed in this blog, however, are purely my own.

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Is Bitcoin a Good Investment?

Bitcoin has reached all new heights, attracting the interest of investors and non-investors alike. Many people are more interested in trying to snag a piece of this crypto-currency’s astronomical gains than really enjoy the unique attributes of an anonymous digital money. So should you buy?

TL;DR – No, you probably shouldn’t invest seriously in Bitcoin, but you can buy one or two Bitcoins for fun if you really want.

I first heard about Bitcoin in 2009 or 2010 from my boyfriend at the time. He even got me to set up a wallet, so I could use my computer to earn Bitcoin’s in the background. At that time, I was freaked out at the idea of something or someone using my computer’s processing power while I slept, so I’m not entirely sure if I actually own any Bitcoins. Last year, I made some efforts to try to find my lost wallet in the hopes of learning out I had a handful of Bitcoins kicking around from my undergraduate days. But in what has been almost 10 years, I had given my old computer to my sister where it has since passed away. If I ever had any Bitcoins, they’re long gone.

What exactly is Bitcoin?

Bitcoin is a digital currency, which means there are no actual coins or paper money representing it. It was started anonymously in 2009, and exists completely electronically. The interesting thing about this is Bitcoin has no real intrinsic value.

Because Bitcoin doesn’t represent something tangible, its value is determined entirely by what people think it to be worth.

Which these days is actually quite a lot.

Unlike the currency of a country which is regulated by a government, no one controls Bitcoin. Likewise, there are no Bitcoin banks. Bitcoins are stored in a digital wallet on the user’s computer or in the cloud. There are risks to both of these: the wallet on your computer can be deleted accidentally or lost if your computer crashes, and a wallet in the cloud can be hacked. Because Bitcoins are not regulated by any government, they’re not insured by the FDIC (USA) or the CDIC (Canada). So if your Bitcoins are every stolen or lost, they’re gone for good.

Why is Bitcoin so popular?

The main reason Bitcoin is so popular now is because it’s trading at an all-time high. But the real reasons Bitcoin initially become popular are because of it’s anonymous and unregulated nature. You can use Bitcoin to buy things anonymously, which has made it popular for making illicit or illegal purchases online.

A less dark perk of owning an anonymous unregulated currency is it’s a great way to tuck away wealth outside of the risk of regular currency volatility. This concept probably doesn’t make a lot of sense for North Americans who enjoy fairly stable currency (except for how annoying it is to buy anything in USD as a Canadian right now), but in countries with less political — and therefore monetary — stability, Bitcoin offers an attractive option removed from this risks of government and currency collapse.

Another important reason Bitcoin is taking off is many businesses are warming up to Bitcoin, both online and off, and accepting it as a form of payment for their products and services. The more companies that accept Bitcoin, the more utility it has, and therefore the more valuable it is likely to become.

Bitcoin as an investment

Why do people want to invest in Bitcoin? Well, for starters, this:

Bitcoin’s growth this year has attracted a lot of interest, even from people who don’t invest in anything.

The downsides of investing in Bitcoin

Bitcoin is volatile af. Few investors can handle watching the price move 20% to 40% in a single day, but that’s the stomach you need to have if you’re going to hold Bitcoin as a long-term thing.

Without insurance or government backing, Bitcoin is one of the riskiest investments available, which means you probably shouldn’t make it the cornerstone of your retirement portfolio. But can you make some quick cash? Probably. Maybe. If you’re really fast and careful, which you’re likely not.

Why you already suck at investing in Bitcoin

One of the hardest things to do when you’re investing is sell when you’re ahead. Why? Because if a security you’ve purchased has rapidly increased in value, you assume it’s going to continue to do so. Considering Bitcoin right now, what do you think the top of the market is? You have no idea. Nobody does. But maybe you’re thinking $2,500 or even $3,000 USD per Bitcoin. However, once your Bitcoins actually reach that threshold, the first thing you’re going to think is, “Damn, I was really off. The top is obviously $5,000!” and then proceed to wait for your investment to hit that target.

There are a few ways to avoid this. The first is to pick your selling target and stick to it, even if it means you’re going to check the value of Bitcoin for the next three years and kick yourself for selling so early after it quadruples in price. The second is to buy a handful of Bitcoin, say 3 or 4, and then sell them off as you hit a step-ladder of price targets, effectively capturing profits while still leaving some skin in the game. Of course, this second method requires you to have $10,000 to play with on uninsured electronic internet currency. Do you?

If you think you’re the person that’s going to be smart enough to sell Bitcoin the month/week/day before its price is cut in half, you’re not. You don’t know any more about cryptocurrency markets than the next person, and realistically, if you’re honest with yourself, you probably know much less (don’t hate the messenger, you’re the one that Googled “is Bitcoin a good investment?” and ended up here in the first place).

The fact of the matter is, you already suck at investing in Bitcoin. Otherwise, you would have entered 5 years ago.

Is there still an opportunity to make money in Bitcoin?

Yes, probably. People are excited about this cryptocurrency and it will likely see gains for awhile. Does this mean you should jump in? Not as an investment, but if you want to put a Bitcoin or two in your pocket for fun, go for it — just make sure you can handle the volatility.

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How to Save For a Baby

Many millennials want to become parents, but their finances are holding them back.

The combined burden of student loan debt and sky-high housing prices make having a family seem like an unaffordable dream, but it doesn’t have to be. It might take some dollar stretching and extra budgeting, but you can afford to have the family you want — you just need to save for it!

Start your Baby Fund now

You have an Emergency Fund, you have a Retirement Fund, and now you need a Baby Fund. Ideally, you would start this before you even begin trying to become pregnant, but even if you find yourself with an unplanned baby like yours truly, a Baby Fund is a crucial first step to ensuring your family starts off on the right financial foot.

A Baby Fund is a dedicated savings account to afford all pregnancy, birth, and child-related expenses.

This is where you’ll save for everything from maternity clothes to prenatal massages to baby toys. Put enough money in your Baby Fund, and you can use it later to top up your maternity leave or even pay for childcare when you go back to work.

To make your money go as far as possible, put your Baby Fund in a no-fee high-interest savings account. The interest rate on the EQ Bank Savings Plus Account is currently 2.30% –far above all others. There’s no minimum balances and no monthly fees. Additionally, unlimited day-to-day transactions mean you don’t have to worry about actually spending the money when you need to on pregnancy and baby expenses.

Outline a Baby Budget

You don’t know what you don’t know, and chances are if you’ve never been pregnant or had a baby you don’t know exactly how much they cost. Don’t worry! Start at the beginning: a pregnancy budget.

Pregnancy lasts 9 months and necessitates a number of essential and optional expenses, but some of the things you should explore and price out so you can get an idea of the cost include:

  • prenatal vitamins
  • maternity clothes
  • a pregnancy pillow
  • prenatal yoga or fitness classes
  • prenatal massages or chiropractic care
  • childbirth & breastfeeding classes
  • a doula
  • a maternity/birth photographer
  • special birth costs (birth center fees, water birth tub, TENS rental, birth ball)

Some items you can go without, some you can find free options for, some you can get secondhand, and some might be covered by your health insurance. There are a number of ways to mediate costs of pregnancy and childbirth, but you should expect to spend anywhere from $1,000 to $4,000 just being pregnant. See? You want to get a head start on that Baby Fund!

When it comes to budgeting for your baby, you want to consider both large ticket and small expenses like:

  • a breast pump
  • nursing pillow & nursing supplies (lanolin ointment, nursing pads)
  • a stroller
  • a car seat
  • a baby carrier
  • baby clothes
  • baby accessories (blankets, burp cloths)
  • baby toys
  • nursery furniture (crib, dresser, changing table)
  • baby care items (thermometer, nail clippers, baby bathtub)
  • diapers or diaper service
  • bottles
  • formula
  • newborn photographer

While it might seem like you need to buy everything right away, you don’t. Some purchases, like a baby swing or even a stroller, can be delayed until after the baby is born. Likewise, resist the temptation to “stock up” on things like diapers on your regular grocery trips — you might find the brand you choose doesn’t work with your baby because of allergies or leaks. Finally, don’t forget the baby shower! Once you find out you’re pregnant, create a baby registry and send it to friends & family who will be attending your baby shower so they can buy you what you need. Trust me, people LOVE to spoil a newborn baby, so you’re better off waiting to see what you receive as gifts before you make any baby purchases yourself.

The EQ Bank savings goals feature will let you track your savings, so once you have an idea of how much you need to save for pregnancy and baby, set your savings goal up in your account and track your progress.

Make your savings plan

One of the easiest ways to make your baby savings plan is to have it follow your weeks or months of pregnancy. For example, the average pregnancy is typically 40 weeks. If you can allocate $100 per week to your baby fund, you’ll save $4,000. Manage to boost this to $150 per week, and you’ll be able to bank $6,000. If you choose a high-interest savings account like the EQ Bank Savings Plus Account, you’ll have even more thanks to the great interest rate!

BONUS: As a special treat for my readers, new EQ Bank Savings Plus Accounts opened have the chance to win one of 10 $150 deposits. That’s enough for 2 months of diapers!

Don’t feel guilty withdrawing from your Baby Fund during pregnancy for pregnancy-related expenses. That’s exactly what it’s for! The entire purpose of setting up a Baby Fund is to help you afford all things related to your new little human, and sometimes that includes splurges like a prenatal massage. Enjoy, mama!

Set up automatic transfers to your Baby Fund

Wondering how you’ll save for expensive items like childbirth classes and a stroller? The same way you save for anything: consistently.

One of the best ways to make sure there’s always money for your Baby Fund is to set up an automatic transfer from your chequing account to your Baby Fund savings account to happen weekly or bi-weekly.

If you time this to happen on payday or the day after, there will always be money available to move to the account. Additionally, setting your savings up to happen automatically means you don’t have to worry about it, and you’ll probably find it doesn’t disrupt the rest of your budget in any noticeable way.

Look for ways to further top up your Baby Fund with extra cash

To maximize your baby savings, always direct any unexpected cash windfalls to the savings account. This can be anything from birthday money to a tax refund to the rewards from a cash-back credit card.

Anytime an extra dollar comes into your hands, deposit it into your Baby Fund. The high interest on your savings means even small amounts can help it grow fast, so make every dollar count.

The EQ Bank Savings Plus Account lets you bank securely and safely from your desktop or mobile, so you can transfer extra cash to your Baby Fund on the go. Funds deposited up to $100,000 are eligible for insurance by the Canada Deposit Insurance Corporation, so your money stays safe.

If you’re looking to the future and that includes a little one (or two!) start your Baby Fund now, so you can focus more on the joys of parenthood and less on the cost!

This post was sponsored by EQ Bank. The views and opinions expressed in this blog, however, are purely my own.

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What Exactly Is Ethical Investing?

Ethical investing, or socially responsible investing, means to put your money where you expect it to have both a positive financial and social or environmental impact.

You can do this by directly buying shares in companies that have ethical practices, or by purchases mutual funds or ETFs of socially responsible companies. In recent years, the demand for ethical investments has grown significantly, which means this once hard to find option is now available to most investors that make it a priority.

Having an “ethical portfolio” is a noble goal, but many see it as impractical because doing so does mean less choice and frequently lower returns when it comes to investing. However, you don’t have to go all-in — why not add one or two socially responsible investments to your financial assets and go from there? After all!, you can do good for the world and still enjoy financial security!

What exactly is an ethical investment?

An ethical investment is exactly what it sounds like: an investment in a company that conducts business ethically.

We would hope all businesses are operating ethically, but the fact of the matter is many don’t. Most of the major brands you know and love make their profits by underpaying third world laborers and wreaking havoc on the environment, or at least outsourcing manufacturing to companies that do. Others fail to adhere to government rules and regulations or deceive investors. Some simply produce poor products that do little more than clutter up landfills.

An ethical or socially responsible company can improve your portfolio while doing good for the world. If you’re interested in investing in ethical businesses, you might want to consider the following when evaluating investments:

  • How does the company treat its employees?
  • Does the company work with ethical suppliers and manufacturers who provide fair wages and good working conditions?
  • Does the company follow government rules and regulations in the country it operates?
  • Does the company give back to local and/or global communities?
  • What does the company do to reduce its environmental impact?
  • Does the business provide a product or service that genuinely improves people’s lives?
  • Does the business provide a product or service that reduces or eliminates environmental waste?

In other words, does the company provide genuine, tangible, non-destructive value to someone other than the owners?

Good ethics are good

What’s the point of seeking out ethical investments? Because the more money you as an investor pour into socially responsible businesses, the more they can grow — and the less money there is leftover for not-so-responsible businesses.

Consumers and investors vote with their dollars. By purchasing shares and products of ethical companies, we are communicating that we value these products and services, and are often willing to pay a premium in order to have them. Since businesses need customers in order to operate and thrive, they will shift their offerings to wherever the money is.

The downsides ethical investing

The hardest part about ethical investing is finding ethical companies or funds to invest in. Then, once you do, it’s paying a premium for their socially responsible ways.

Because socially responsible businesses are being socially responsible by not doing things like underpaying workers or carelessly disposing of waste, they can have higher operating expenses. These increased costs are often passed on to customers, which is why green or organic products often cost more at the store. Likewise, these increased costs can also cut into shareholder profits, which is why the return on these investments might not be as great as less ethical businesses in the same space.

It’s not uncommon for ethical mutual funds or ETFs to boast higher fees than traditional funds. Because higher fees on any investment can drastically reduce returns, this can make socially responsible investing less attractive based purely on financial considerations. You have to glean more value from supporting a moral business than earning a higher return from an immoral one, because often — but not always — that will be the trade-off.

The unfortunate reality is that companies that utilize child labor or don’t care about the environment are able to drastically cut costs, and therefore increase profits, which gets passed on to shareholders. However, your life is about more than money and your financial plan should be too (yes, really), so if you feel passionate about protecting human rights and the environment, make space in your portfolio for socially responsible investments.

How do I find socially responsible investments?

It is getting progressively easier to find ethical funds to invest in. Thanks to demand, both selection and prices are improving. Most major ETF providers like Vanguard and iShares offer social index funds. Some financial advisors now specialize in the area of ethical investing, or at the very least, have some funds to suggest to their clients.

For investors looking to purchase common stock in a socially responsible company, there’s considerably more legwork. However, I would suspect that if ethical and green living is already a priority for you, you probably have a few favorite brands that you’ll be able to find on the stock market.

How much should I focus on ethical investing in my own portfolio?

Where your ethical asset allocation falls is totally up to you. If you haven’t looked into socially responsible investing before, setting a soft goal of dedicating 10% of your portfolio to ethical investments might be a good place to start. As you become more familiar with what’s out there, you can slowly increase this portfolio allocation by adding to these investments, and replacing your existing investments with more socially responsible ones until your portfolio reflects your values.

Ethical investing is good business, even if it doesn’t always show up on your financial statement. Some returns are measurable in different — but no less important — ways.