Ask the Fool: Investing responsibly
Q: What’s a good way to invest in socially responsible companies? — D.L., Flagstaff, Arizona
A: Consider mutual funds or exchange-traded funds (ETFs) that focus on socially responsible companies. That saves you the trouble of studying companies and choosing the most promising ones — you instead let professional stock analysts do that work. Or, with passively managed funds, the managers simply hold the same securities that are in a socially responsible index.
Some such funds have the acronym ESG in their title, meaning that they focus on “environmental, social and governance” factors. Here are a few to read up on and consider: The iShares ESG Aware MSCI USA ETF (ticker: ESGU), the Vanguard ESG U.S. Stock ETF (ESGV) and the Invesco ESG NASDAQ 100 ETF (QQMG).
Understand that there are many ways for you (or a fund) to invest responsibly. You might focus on companies that seem to be doing good for the environment or society. Or you might just avoid companies you find objectionable — such as those that make and sell products you disapprove of (perhaps alcohol, guns or tobacco, for example).
Q: Why does the stock market’s value go up or down every day? — V.N., Bella Vista, Arkansas
A: The total market value reflects the movement of thousands of companies’ stocks. Each stock moves frequently, influenced by what investors think of it, based on the latest news or developments. Good news often pushes a stock’s price up, and bad news does the opposite.
Fool’s school: Do you need long-term care insurance?
Long-term care (LTC) insurance — which helps pay for nursing home, assisted living, or in-home care you may need in the future — is a kind of financial protection that most of us should consider. It’s expensive, though — for policy holders and insurers alike — making the decision regarding whether to get it rather complicated.
Facing LTC costs without it can be tough: The folks at Genworth recently noted that a year of home health aides averages around $75,500 per year nationally, while a year in an assisted living facility costs $64,200 and a shared nursing home room averages $104,000.
Without LTC insurance, if you end up needing help with daily activities such as eating, dressing and bathing, you might deplete your savings paying for care or may have to rely heavily on family members to care for you. A 2022 government report estimated that 56% of people turning 65 would need long-term services and supports for some period.
So what should you do? Definitely look into LTC insurance, paying attention to what a policy will and won’t cover. The average annual premium for a $165,000 benefit policy was recently $950 for a single male and $1,500 for a single female, both aged 55. (Women tend to live longer and often need more care.) The older you are when you sign up, the higher the price will likely be.
You might be able to pay less if you buy a policy in your 50s, or you and your life partner buy policies together. You might also save by opting for policy features such as a shorter coverage period (such as two years instead of five) or a waiting period before the policy starts paying, or by forgoing inflation protection.
Your decision on a LTC policy will likely be heavily influenced by how much money you have now and will have in the future, but it’s worth looking into. Alternative ways to pay for care include health savings accounts (HSAs) and some annuities that feature long-term care benefits. Read up on LTC insurance before you buy.
My smartest investment: Roth IRAs for the win
I’m 84 years old and earned an average middle-class salary during my working years, but I did several things that made me wealthy. I maxed out contributions to retirement plans, such as 401(k)s and SEP IRAs. I invested those contributions in no-load mutual funds.
My smartest move was in 1998, when Roth IRAs became available. My accountant asked if I had confidence that the U.S. stock market would grow at about 6% or more over the next 10-plus years. I said yes. He then recommended converting as much as of my retirement funds into Roth IRAs as I could. This caused a significant financial burden since there was a large tax due with each conversion. My wife and I agreed it was worth it. We lived frugally for a few years to make it work.
Now in retirement, our only income is Social Security, a small pension and required minimum distributions (RMDs) from our SEP IRAs. Our portfolio is under seven figures and mostly in Roth IRAs, meaning we can withdraw as much as we need tax-free! Those years of living frugally were well worth it. — Anonymous
The Fool responds: Bravo! Roth IRAs can indeed be powerful wealth builders, and ending up with a big account to tap tax-free in retirement is hard to beat.
Foolish trivia: Name that company
I trace my roots back to 1869, when a German immigrant in Manhattan started offering financial services to merchants. I joined the New York Stock Exchange in 1896 and soon had European clients. I got into investment banking in the early 1900s and helped Sears, Roebuck and Co. go public in 1906. I was a pioneer in valuing companies by their earnings prospects instead of their hard assets. With a recent market value of $180 billion, I’m a top global financial services company; I have more than $3 trillion in assets under supervision and more than $50 billion in annual revenue. Who am I?
Last week’s trivia answer
I trace my roots back to Indianapolis in 1876, when a Civil War veteran launched me, aiming to develop and sell products to ease people’s pains. My staff treated World War I soldiers in France. In 1923, I introduced the first commercially available insulin. I mass-produced penicillin in the 1940s and was among the first to manufacture the Salk polio vaccine. Today, with a recent market value of over $700 billion, I’m a major pharmaceutical concern, tackling diabetes, Alzheimer’s disease, immune system disorders, cancer and more. I recently employed 46,240 people, more than half outside the United States. Who am I? (Answer: Eli Lilly)
The Motley Fool take: A health care dynamo
Abbott Laboratories (NYSE: ABT) is a well-diversified health care company, with four distinct units: medical devices, diagnostics, nutrition and established pharmaceuticals. This is great because it means if one of these businesses faces tough times, another could compensate and maintain overall growth.
In fact, this is happening right now. With coronavirus testing on the decline, the diagnostics business has seen revenue fall. But in the third quarter, the medical devices unit delivered double-digit revenue growth, helping Abbott to report a 5% year-over-year increase in revenue to $10.6 billion.
Abbott sells market-leading products across its businesses, from the Ensure brand in its nutrition business to the FreeStyle Libre continuous glucose monitoring (CGM) system in its medical devices unit.
The company also has a full pipeline of innovations to keep the growth going. It most recently launched Lingo, a CGM platform for wellness purposes.
Abbott shares recently traded at a forward-looking price-to-earnings (P/E) ratio of 22. That’s a reasonable price to pay for a company that has a strong track record of growth, leading products and solid long-term prospects. (The Motley Fool owns shares of and recommends Abbott Laboratories.)
— distributed by Andrews McMeel Syndication
