What Makes a Good Investment? Building a Values-Aligned Portfolio

What makes a good investment? Making a profit on a particular stock? Good. Getting rid of an investment that was projected to double in the next five years? Not good. But when it comes to the principles that guide values-aligned investing, there are deeper things to consider. 

Our clients often ask about the process we follow to identify investments we can confidently recommend and others that don’t pass the test. So in this post, we will take a look at our investment-vetting process.


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Why Do We Analyze Company Values?

Quite simply, we analyze companies to serve our clients better. We serve our clients by providing investments that align with their values and goals. We believe that market forces put pressure on companies to behave responsibly, but that is a natural result of the service we provide for our clients and not our primary objective. We exist to help our clients live well and finish well.

Criteria For “Good” Investments

Before we get too deep into what the process looks like, let’s look at a framework for determining what makes good investment. We start by checking to see if the company fills a need, makes a sustainable profit, provides a positive return, and blesses humanity. 

Do your investments align with your values?

For example, a healthcare company that ethically engages in cancer research both fills a need and blesses humanity within its mission. If this company is growing and is projecting successful long-term strategies, it also provides a sustainable profit for the investor. 

So, how does it work when an investment doesn’t fit one or all of the above criteria?

Screening Out Investments

Sovereign Financial has a team of investment strategists and managers that screen over 6,500 companies every quarter. We look at each company qualitatively and quantitatively.

Qualitative: What is its Moral Value?

Our first question is always, “Do these companies profit from, or engage in industries and activities that go against our core values?” Our primary core value in investing is to affirm the dignity of every single person and every square inch of creation. As a result, there are four key areas of involvement we can eliminate off the top, which our clients have communicated are important to them — abortion, pornography, tobacco, and gambling. These activities actively exploit the dignity of those in our society who are the most vulnerable, particularly children and those in poverty.

What qualifies as “being involved in” these avoidance areas? We look at how much these companies engaged in these areas and how recently the engagement occurred. For instance, we don’t want our investment dollars to rise and fall based on the profits of a cigarette company–based on how many people have picked up smoking as a habit in the past quarter. However, we want to be reasonable. If a media company once owned a subsidiary that produced pornography, but sold it several years ago, we don’t believe in punishing a company after it distances itself from a previously poor affiliation.

This is one of the reasons why this is a quarterly process. As these companies demonstrate changes in their values, we want to ensure they continue to align with our clients. 

Quantitative: What is its Monetary Value?

One of the biggest misconceptions about values-aligned investing is that “doing good” and earning a profit aren’t compatible. Two of the criteria we look for in these investments are sustainable profit and positive return. Even if a company engages in reduction of carbon emissions and environmental sustainability, that doesn’t mean they are a good candidate for investment. If they have a history of poor returns, then it wouldn’t be in our client’s best interest to recommend investing in the company no matter how their values align. 

Values-aligned investing is about more than profits. In order to invest with integrity, we have to both affirm the dignity of those around us and invest with financial responsibility. We want to grow what you give us so you can grow.

Building Values-Aligned Portfolios

After our team has analyzes the investable companies in the market without compromising on either values or financial goals, they build out portfolios that work for our clients. 


Your values inspire the way you live. Shouldn’t they inspire the way you invest? To learn more about building your portfolio around what matters most to you, contact us today!

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