younger investors may be most closely associated with wanting to invest in companies that align with their principles but plenty of older adults are interested in doing so too with them in mind i’ve created model “bucket” portfolios featuring exposure to environmental social and governance funds these portfolios are geared toward retirees’ taxdeferred accounts that they are actively drawing upon to provide them with cash flows these model portfolios are geared toward retired investors who are drawing upon their taxdeferred accounts to meet a portion of their living expenses bucket 1 of each portfolio is to provide money for cash needs for a year or two so we’re not taking any risks with it investors can use some combination of certificates of deposit highyield savings accounts or money market mutual funds for this portion of the portfolio cash investors who would like to make sure their holdings align with esg principles might consider blackrock liquid environmentally aware leaf a money market fund bucket 2 covers another eight or so years’ worth of cash flow needs it’s designed to deliver slightly more income than bucket 1 as well as a dash of inflation protection and capital appreciation thus it consists mainly of highquality short and intermediateterm bonds bucket 3 is the growth engine of each of the portfolios geared toward years 11 and beyond of retirement the portfolios consist exclusively of funds that rate as morningstar medalists meaning our analysts think they’re likely to outperform their peers over a full market cycle i’ll make changes to the holdings only if their fundamentals change or they no longer rate as medalists my esg etf portfolios are designed to limit tracking error relative to broad market indexes as such they’re less “esgforward” than their mutual fund counterparts with the mutual fund portfolios i’ve focused on funds with more esgforward strategies for example the largest domesticequity holding in the portfolios parnassus core equity prblx has long been a leader in the esg investing space and applies rigorous esg standards to each of the holdings that comes into the portfolio because the mutual fund portfolios encompass a heavier esg emphasis i would expect them to exhibit performance that differs more meaningfully from market benchmarks than the etf portfolios in particular the mutual fund portfolios tend to lean toward the growth side of the morningstar style box whereas the etf portfolios are better balanced along the valueblendgrowth spectrum and because the mutual fund portfolios are anchored with active equity funds their costs are obviously higher too i focused on funds that are widely available from major brokeragefirm platforms without a load or transaction fee there’s one exception investors will need to pay a transaction fee to buy pimco total return esg ptsax—discussed below—on major brokerage platforms how to use them note that the goal of these portfolios isn’t to generate the best returns of any retirement portfolio on record but rather to help retirees and preretirees visualize what a longterm strategic totalreturn portfolio would look like thus a newly retired investor could follow the basic bucket concept without completely upending existing favorite holdings investors should take care to customize their portfolios to suit their own situations—risk tolerance and capacity of course but also planned spending an investor’s own cash bucket and in turn the allocations to the other two buckets will depend on his or her portfolio spending rate if an investor is using a lower starting withdrawal rate—say 3 in the first years of retirement—bucket 1 would accordingly be smaller 6 versus 8 in my aggressive portfolio investors who are seeking more indexlike performance andor those who would like to lower their total costs can reasonably employ any number of fine core esg index funds in lieu of the actively managed options featured here a version of this article was published on april 16 2021