Socially Responsible Mutual Funds - A Brief Guide
Mutual funds are the latest investment rage in town but they are of various types. One of the types of mutual funds is socially responsible mutual funds . These are the funds that exclusively invest in the socially responsible investments . There are companies that stick to all the social, political, moral and religious norms and their securities are an example of socially responsible investments.
A socially responsible portfolio manager makes it a point to include the company’s community investment, environmental responsibility, employee benefits, animal testing and product offering in addition to the basic quality analysis of the product. Companies involved in tobacco products or gambling and other such businesses are excluded from the portfolio.
Holdings of Socially Responsible Mutual Funds
The choice of the companies depends from individual to individual. Since the individual perception could vary, there are a lot many types of socially responsible mutual funds that could be looked in to by the investor. One could completely negate the companies involved in un-ethical businesses while the other one may like to go for the environmentally responsible companies.
It is the job of the portfolio manager to decide upon the structure of the mutual fund. He might include or exclude any of them frame a style format that is able to fetch you the perfect style and goal. The performance of a socially responsible mutual fund has been at par with the other mutual funds in the past few years.
Advantages of Socially Responsible Mutual Funds
Socially responsible mutual funds are a great way to make money through scrupulous ways. They do not ask you to be unfair to make money. You could be ethical and still make a lot of good money. Since, social investors seek a perfect combination of profits and social good, managers have to work really hard to strike the right balance. The criteria used while screening for stocks all depends upon the goals of the fund. For example, if a particular fund is very sensitive towards the environmental issues then it would like to pick stocks of the companies that perform much higher environmental duties than mandatory standards.
Also, there are such socially responsible mutual funds that go on to invest a part of the whole money in community investments. Some people take such investments for donations but actually they are not donations. The people who make these investments actually help the society in need by providing them money and in turn get returns for that money.
As an investor you must know that the socially responsible mutual funds have higher fees than the usual mutual funds. But, despite their high fees, these funds are a preferred investment option with many.
