First stock buy! Fiscally Responsible Sunday

Reading Time: 3 minutes

So this money is just permanently in my Roth IRA, * and given the recent perennial focus on the economy on everyone’s minds, I got around to putting my Roth IRA in the stock market.

This is terrifying! People do this with large amounts of money that could all just disappear?? All the time???

* (yes I did at least know to put it in there, since you can only put in an amount every year, and if you miss it I guess you cannot put it in in the future, so there was some time pressure. Also it is easy to understand that as a student my taxes are low compared to when I will have a real job and more money).

I guess I could be terrified to not have access to that money for years, but I have managed so far without it for a while. It is 100% only because I have a financially stable family that has smoothed out my rough patches over the last few years.

Anyway my friends (mostly Marcela) have been telling me for years that it’s better to put Roth in the stock market than just let it accumulate interest (which is very low). And I just never quite put all the steps together. (It feels like how I rode around on a flat bike tire for two or three months before figuring out how to patch/change an inner tube).

It helped to know that there are “sustainability funds” which I guess are meant to mean “environmentally sustainable”.

So yea, I guess this is a good, fiscally responsible step as an adult.

These index funds (NOT managed funds!) are described as sustainability funds. As quoted from this link:

According to MSCI, this investing approach looks at a company’s environmental, social, and corporate governance (ESG) practices as well as its overall investment decision-making process. While such an investing approach isn’t new, its definition and objectives have evolved over the years—from avoiding certain investments (so-called “sin stocks,” such as tobacco, firearms, alcohol, and casinos) to a more holistic approach, based on ESG factors, which include:

Environmental impact—An environmentally friendly investing objective can include companies that produce renewable and sustainable energy, enhance energy efficiency, source raw materials using eco-safe methods, use little or no hazardous chemicals in their production process, limit waste, and prioritize recycling. T

Social issues—Positive social investing objectives focus on companies that consider the impact upon all stakeholders, such as seeking gender equality, providing healthy working conditions and lifestyles, addressing wealth inequality, and showing a commitment to charitable endeavors, among other factors. The largest fund by net assets that focuses on gender diversity is the SPDR SSGA Gender Diversity Index ETF ( SHE).

Governance quality—Strong corporate governance systems entail having policies and principles that address potential conflicts of interest among stakeholders (e.g., managers implementing policies that benefit themselves, rather than shareholders), and including an independent board and audit committee that seek to protect shareholders over management.

My money is in Fidelity, which means I have access to Fidelity’s (proprietary, e.g. Vanguard index funds are only accessible if I banked with Vanguard) index funds.

Each index fund also has a “prospectus” that explains the idea behind each fund.

  • FITLX
  • FNIDX
    • Normally investing at least 80% of assets in securities included in the MSCI ACWI (All World Countr Index) ex USA ESG Index and in depository receipts representing securities included in the index. The MSCI ACWI ex USA ESG Index is a capitalization-weighted index that provides exposure to companies with high environmental, social, and governance (ESG) performance relative to their sector peers, as rated by MSCI ESG Research. The MSCI ACWI ex USA ESG Index consists of large- and mid-cap companies across developed and emerging markets, excluding the United States

I am not sure why / i it matters, but the “management fee” for the international index fund is twice as much as the fee for the U.S. one.

You can also see the companies the index fund invests in:

 

projects blog (nouyang)