Today, FolioKarma released a new app in Apple's App Store that allows investors to take personal values into account while investing and provides them with transparency into how each ethical decision might impact the performance of their portfolios.
Currently, investors do not have a tool that enables them to invest based on their own ethics, and they don't know the performance costs associated with their ethical beliefs. FolioKarma not only addresses these issues, but also allows investors to customize their portfolios based on their own belief sets.
"The integration of ethics and investing is happening with increased frequency. More and more, we see investors moving to sustainable ethical funds. However, these funds are ethical cookie-cutters geared toward groups of investors," said Kei Kianpoor, Chief Executive Officer of FolioKarma. "FolioKarma helps an individual investor control how she feels about companies in her stock portfolio by seeing all of the activities each company is engaged in."
An investor can rate these activities and determine the performance cost or benefit of eliminating these companies from her portfolio or adding other companies more in line with her beliefs.
FolioKarma provides investors with the only thing they CAN control in the market—ensuring that activities of companies in which they are invested align with their ethics and aspirations.
How Karma Controls Investments
Karma is often defined as the totality of one's actions and previous states of existence, and how these actions impact the future. This same principle speaks to how investor funds are used by publicly listed companies to affect the world.
"Investors typically look at companies' historical or expected future financial performance as the only indicator for whether or not they should invest in them. This is akin to focusing on the tip of an enormous iceberg," Kianpoor explained. "With FolioKarma, investors can expand their research to all activities engaged in by companies."
They can also quantify the potential impact of eliminating companies with undesirable behaviors, or adding companies with desirable activities on their portfolio's performance.
Using FolioKarma is easy:
- An investor enters names or stock ticker symbols that interest them.
- The investor chooses different categories and filters that concern her, including social issues, labor issues, environmental ratings and corporate governance.
- Once these filters are applied, she can see what activities these companies are involved in, and can rate a company's activities as being in line or against her ethics.
- FolioKarma derives an aggregate score by company and by portfolio based on that individual's belief system. This "Karma Footprint" reflects the degree of positive karma within a portfolio.
- If the investor does not agree with a company's actions after seeing an approximate measure of how good it would have been as an investment, she can 'KarmOptimize' her portfolio by removing the company from it. Removing this bad karma allows an investor to channel her energies—and resources—on companies that are engaged in activities that she approves.
FolioKarma is asking investors to rethink how stocks are qualified by viewing the performance of companies whose activities they agree with—those with good karma—against those companies whose activities they don't agree with, those with bad karma.
Sharing Karma for Institutional Investors
Equally as important to FolioKarma is the role it can play to forge closer relationships between financial advisors and their clients.
"Historically, financial advisors have had difficulty gearing portfolios to each client's ethics and articulating how they impact a client portfolio. They might know about financial strength of investment classes, but they have no means to understand how the inclusion of client ethics would impact performance," Kianpoor said.
"FolioKarma can guide professionals to make more informed client recommendations by addressing issues that could greatly enhance the client/advisor dialogue but were until now impossible to measure. FolioKarma can help advisors forge stronger relationships that go beyond financial returns."
"FolioKarma empowers investors and their advisors by providing individualized content to determine whether they approve of the business practices of the companies they are invested in, assess the performance cost or benefit of investing in securities more aligned with their beliefs, and execute these decisions in a simple and more transparent way."