From
Your Perspective:
Socially responsible mutual funds
Researching socially responsible funds
Even when investing in line with your beliefs is important to you, you still want to evaluate any fund you're considering to ensure it is appropriate for helping you meet your investment goals.
You'll want to compare a fund's
return
with other funds with the same or similar investment objectives, regardless of whether or not they're considered socially responsible and how the fund stacks up against its appropriate mutual fund and general market
benchmarks.
Some SR funds are so new that you may have performance figures for only one year, though being able to go back five or ten years is preferable so that you can evaluate returns through a full economic cycle of market ups and downs.
Fee factors
Mutual fund fees, including sales charges, management fees, redemption charges, and marketing — or 12b-1 — fees are also an important consideration in selecting a fund. That's because the fees you pay when you own shares in a fund affect what you actually earn. For instance, if your mutual fund has a 9% total return one year and your total annual fees in that fund average 1.5%, your actual rate of return on your investment before taxes and inflation is 7.5%.
Another question to ask about an actively managed fund is whether the same fund managers are at the helm. Their decisions have affected past performance and will have a future impact — though what they accomplished in the past doesn't guarantee future returns.
You can find information about the funds in their prospectuses and other materials they publish, on their Web sites, and from your broker or other financial professional. You may also want to check the financial media and mutual fund research companies such as Standard and Poor's, Lipper, Morningstar, Inc., and Value Line, Inc.
If you're looking for a list of socially responsible mutual funds to investigate, you might try the Social Investment Forum at www.socialinvest.org.
