Passive Investing for the Social Activist

Issue 02-13-17   |   Reviewer:   Bob Cohen, MBA


For many people, passively managed index funds have a powerful appeal: Buy one fund and be done. But one-size-fits-all funds can be a problem for those who want to put their money only into companies that are consistent with their values. OpenInvest, an online startup, thinks newly-moneyed millennials will be willing to pay extra for a passive investment that allows for more of a voice.

Harking back to the days when investors chose stocks directly, Chief Strategy Officer Joshua Levin says that people want to make decisions that reflect what they care about. There have long been mutual funds that include social factors among their stock-selection criteria. The difference is that OpenInvest allows customization. Users click through a series of menus to create an “issue profile” and can nix weapons manufacturers, tobacco companies, and even those whose executives have backed Donald Trump.

OpenInvest has entered a crowded field of online advisers. Brokerage giant Charles Schwab has also gotten into the mix, and money managers Vanguard, Fidelity, and BlackRock have all started or acquired similar services. Alois Pirker, director for research at Aite Group’s wealth management practice, says, “Socially responsible investing is absolutely somewhere you can differentiate.” But, OpenInvest will have to show that its custom portfolios do about as well as the market over time.

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