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  • Writer's pictureWiseWallet

The Power of EFIV: Strong Returns with ESG Focus


In our previous article, we introduced the concept of ESG (Environmental, Social, and Governance) and SRI (Socially Responsible Investing) investing. Building on that foundation, let's dive into EFIV, the SPDR S&P 500 ESG ETF, to see how this fund can fit into your investment strategy and align with your values.

 

What?

EFIV, the SPDR S&P 500 ESG ETF, is an exchange-traded fund that tracks the S&P 500 ESG Index. This index includes companies from the S&P 500 that meet specific environmental, social, and governance (ESG) criteria, while aiming to maintain a performance similar to the broader S&P 500 Index. The fund seeks to provide investors with exposure to firms that have strong sustainability practices, making it a compelling option for those interested in responsible investing.

 

So What?

Investing in EFIV offers several key benefits:


Performance and Sustainability: EFIV has shown strong performance, closely mirroring the returns of the S&P 500. For instance, as of July 2024, the fund's 1-year return was +23.26%, which is competitive with traditional S&P 500 ETFs​. The chart below shows the performance comparison between SPY and EFIV since EFIV's inception. EFIV outperforms the most well-known S&P 500 ETF, SPY.



Cost Efficiency: With an expense ratio of just 0.10%, EFIV is more cost-effective compared to many other ESG funds. Lower fees mean that more of your money stays invested, potentially enhancing long-term returns​.


Growing Popularity of ESG: The trend towards ESG investing is gaining momentum. More investors are considering ESG criteria in their investment decisions, driven by increased awareness of environmental issues, social justice, and corporate governance practices. This shift is likely to continue, making ESG funds like EFIV increasingly relevant​.


Top Holdings: EFIV's top holdings include major companies like Microsoft, Apple, NVIDIA, and Alphabet, ensuring that it remains invested in industry leaders while adhering to ESG standards​ (see the table below for its top 10 holdings). It is interesting to note that the fund includes Exxon Mobil due to the company's efforts and progress toward net zero, carbon capture, and renewable energy.

 


Now What?

For everyday investors, EFIV presents a solid opportunity to align financial goals with personal values. Here are some actionable steps:

  • Assess Your Portfolio: Evaluate your current investments and consider adding EFIV if you want to increase your exposure to ESG-compliant companies without compromising on performance.

  • Long-Term Perspective: Like all investments, ESG funds can be subject to market fluctuations. Maintaining a long-term perspective is crucial, as the focus on sustainability is expected to drive growth over the coming decades.

  • Stay Informed: Keep an eye on developments in the ESG space and the performance of EFIV. This can help you make informed decisions and adjust your portfolio as needed.

  • Diversification: While EFIV is a robust option, diversification remains key. Consider balancing your portfolio with other asset classes and sectors to mitigate risk.

 

Concluding Remarks

EFIV ETF offers a compelling blend of sustainability and performance, making it an attractive option for investors seeking to align their portfolios with their values. As ESG investing continues to grow, funds like EFIV are poised to play a significant role in the future of finance. As always, we recommend consulting with financial professionals to ensure that your investment decisions align with your personal financial goals and risk tolerance.

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