Many of us try to live an ethical life.
We want to treat people well, live responsibly, and do our part to make sure the world is better for our children than it was for us.
We try this in our everyday lives, but what about in our investments?
OpenInvest is an online asset management platform that promotes responsible investment.
They build portfolios and give out financial advice to advisors, institutions, and individuals who want their money to go toward companies that are working to better the world.
In this article we will dive into OpenInvest, as well as the world of impact investing.
We’ll look at some causes they support, and what sets the company apart.
What Is OpenInvest?
OpenInvest is an online investment platform and advisor that has the stated goal of bringing ethical investing into the mainstream.
Backed by Y Combinator and Andreessen Horowitz, who both contributed Series A funding, the company was started by people who used to work in the hedge fund industry and decided to do something to make a difference.
It was founded in 2015 by Phillip Wei and Joshua Levin, and is now headquartered in San Francisco.
OpenInvest provides impact investing guidance for financial advisors, retail investors, institutions, and even individuals.
For the purposes of this article, we will focus mostly on their individual investing services, though you can learn all about their other products at www.OpenInvest.co.
OpenInvest is officially a Public Benefit Corporation, a legal distinction that states that the company has “public benefit as a charter purpose in addition to the traditional corporate goal of maximizing profit for shareholders.”
A Brief Guide to Impact Investing
Impact investing, or ethical investing, is the act of putting money into companies that not only have the power to grow (thus earning you more money), but also have the power to change the world.
These companies should be able to generate a measurable benefit for society or the environment alongside generating a financial return for investors.
Wind energy, solar grids, micro-finance in impoverished nations, education, sustainable agriculture — all of these represent fields where companies are looking to not only turn a profit but help the world around them.
Impact investors not only look at the bottom line but let their personal values guide them in finding companies to invest in.
These investments can be both in for-profit or nonprofit companies, and in emerging or fully developed markets.
Ethical investing is a growing trend for individual investors, but we’re also seeing a lot more impact investing from institutions, including university endowments and the Catholic Church.
Impact investing can take the form of investment in companies with a broad mission for good, but it can also take the form of divestment from companies that are perceived as having ethical issues.
What Sets OpenInvest Apart
OpenInvest will not only find companies that reflect what is important to you, they will also give you reports on the impact those companies are making … as well as the returns they are generating for you.
It works like this: You start by taking a survey to let OpenInvest know what causes you are passionate about.
They then take that information, and build a low-cost investment portfolio for you.
Once you’ve got a portfolio, they take care of asset management and other financial services to make sure your money is growing.
Finally, they give you real-time reporting to see how your socially responsible investing is doing … both for your own wealth and for the greater good.
They measure this via “environmental, social and governance” (ESG), which refers to the three main factors used to measure the impact and sustainability of an ethical investment.
Not only will you know how you’re doing, you’ll know what difference the companies are making in the world.
And if companies are underperforming on either front, OpenInvest has a dynamic divest function which will rebalance your portfolio.
OpenInvest has a flat fee of 0.5% which gives you access to your custom-built platform as well as a super smart robo-advisor which maintains and updates your portfolio.
They point out that this fee covers everything, while other investment platforms will hide ETF (exchange-traded fund) fees in investments, which cut into users’ earnings.
OpenInvest doesn’t work with funds, as they want more control over where each dollar goes and invests in individual companies.
Because of this, there are no fees for trading with these ETF funds.
OpenInvest also practices Tax Loss Harvesting, where losses are sold off for tax write-off purposes, and then re-bought in at a lower price, hoping to get in on the eventual growth of a company.
This is a common practice among the very wealthy, which allows people to get tax breaks on bad past performance but still take a long-term approach to an investment and get the most out of future results.
OpenInvest notes that Tax Loss Harvesting can sometimes cover their annual fee in one stroke.
Here are some causes you can champion through your investments with the company:
- Commit to racial justice by investing in community institutions for more resilient, economically healthy communities.
- Invest in healthy hearts by putting money into medical research, as well as clean eating, exercise, and other companies looking to make healthier people around the world.
- Reduce greenhouse gas emissions by investing in companies that seek to fight climate change, as well as divesting from fossil fuel companies.
- Divest from the dark money that is being poured by companies into our elections.
- Fight deforestation by investing in land use companies seeking to re-forest land in the United States and abroad.
- Divest from big tobacco, which is a killer of over 400,000 Americans each year. This cause eliminates any companies which derive 5% or more of their revenue from tobacco.
- Invest in female leaders by putting your money into companies that have major representation from women in their corporate leadership team.
- Invest in ethical supply chains by putting your money into companies that score high on the The Human Rights in the Supply Chain chart, which was developed using data and analysis from Humanity United, the Business & Human Rights Resource Centre, Sustainalytics, and Verité.
Frequently Asked Questions
We’ve gone over OpenInvest, their causes, and what sets them apart from other companies.
Let’s get to some frequently asked questions about the platform.
1. Can I rollover my 401(k) to OpenInvest?
You absolutely can.
When you set up your account, just make sure to set up an IRA account, and then make sure the type you select is the same as your existing account:
Traditional, Roth IRA, etc.
Then, when you choose how you’d like to fund your account, choose “Check.”
Request a rollover from your old 401(k), and they should offer to cut you a check.
Make that check payable to Apex Clearing with the memo: FBO [Full Name] [Account Number], and you should be good to go.
2. Is there a minimum deposit to open an account with OpenInvest?
There is a $100 minimum to open an account.
This is slightly more that some other online investment platforms.
You can see a comparison of a few in our article on the subject.
3. Will I lose out on money by investing ethically?
It’s hard to quantify one way or another.
Plenty of people invest ethically and make a ton of money, and plenty of people invest with no thought toward ethics and lose money.
By choosing impact investing, you are narrowing the number of companies you can put money toward, but there is still money to be made, and if living ethically is important to you, having your money contribute to that may be worth it to you.
Invest in Good With OpenInvest
If you are looking to get into investing and living ethically is important to you, you might want to check out OpenInvest.
With competitive fees, strong perks, and a modest minimum deposit, it’s accessible to many investors, and can allow you to put your money toward companies and causes you feel strongly about.
The service will allow you to grow your money and do it behind companies you support — a best of both worlds scenario.
You can make money, and do it ethically, with OpenInvest.