The terms ‘value-based investing’ and ‘values-based investing’ are often thrown around in discussions regarding ethical investments and Socially responsible investing and can easily be confused. However, as technical terms, they mean different things.

​

A “Value” approach to investing refers to a method of selecting investments based on a quantitative calculation or determination of its intrinsic value (i.e. what it is worth) on the belief that over the long term, the market tends to revert to its intrinsic or fundamental value.

​

Therefore, various methods are used to try to accurately determine the intrinsic value of a company by taking into account such factors as financial performance, revenues, earnings, cash flows, assets and liabilities, and profits.

​

“Values-based” investing means including extra rules (‘values’, ‘morals’ or 'ethical' related) when investing. There are many ways to do this. Our approach is to first define the investible universe based on a set of values and ethics by screening out those companies whose activities breach any of the ethical criteria (e.g. manufacture of weapons, promote gambling, employ child labour, etc).

​

Value-based investing combines investment “value” and investor “values” in order to design a selection of investments that are tailor-made to suit the specific requirements of the investor (you). While it uses some of the same social or environmental information as values-based investing, it does so within the investment selection process to improve performance.

​

At FinancialStrategy.com.au, we refer to our investment philosophy as “Value + Values” because it uses a quantitative analysis to determine the value of a security and provides a values-based screen so that each investor can tailor their individual portfolio to their own specific ethics and values.

​

Our investment selection process starts with a rigorous quantitative screen which filters out all but the best value companies at a given point in time. Our research team then applies a detailed fundamental analysis and risk assessment of the remaining shares to create an extensive pool of high-quality assets from which you can select those that most closely align with your values. 

​

The integration of ethical and SRI factors into core investment processes is one of the best predictors of a company’s long-term success. Therefore, using a Value + Values approach optimises the performance of your portfolio by buying high-quality assets at discounted prices.