What are Socially Responsible Mutual Funds?

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socially-responsible-mfs-3332163 Every person has his own perspective regarding investment. Some prefer to invest through buy to let mortgages, while others invest in mutual funds. The problem that many investors face with mutual funds investment is that they don’t have any control over how and where the money is getting invested in. As a result, they often put their money into things that conflict with their personality, mentality and personal beliefs. However, nowadays, many companies have introduced different mutual funds in the market considering different viewpoints of the investors; for example, socially responsible funds and environmentally responsible funds. There are some investors who want to invest their money for social reasons. If you belong to this group of people, you can invest your hard-earned money in socially responsible mutual funds.

Socially responsible mutual funds – Fundamentals

Socially responsible mutual funds can be considered as the funds that invest in causes deemed as socially responsible. Conventional mutual funds don’t have any moral obligations on how the invested money will be used. For instance, the money invested in mutual funds may be used in casinos or for weapon manufacturing.

However, socially responsible mutual funds possess specific investment features targeting the social standards. Moreover, these funds have a special incentive feature. Investors investing in such funds are subject to get some incentives for using their money to help the society.

Socially responsible mutual funds – Types
Socially responsible mutual funds can be categorized in two distinct categories. One category is faith-based; the money invested in such funds is mainly used for improvements of the churches as well as missionary projects through proper ministries. The second category of mutual funds mainly invests in businesses and technologies that work for the betterment of the Earth; for example, alternative energy research projects.

Socially responsible mutual funds – Performance

There are a number of socially responsible mutual funds available in the market to invest in. The performance of each of these funds differs from the other. There is nothing static when it comes to return on investment (ROI). In fact, mutual funds investments are always subject to market risks. Some mutual funds may perform excellently, while others may not yield good return. Sometimes they may even lose money. It is unknown whether or not socially responsible mutual funds’ performance is influenced by ups and downs in social scenarios.

Socially responsible mutual funds – How to invest

Now it comes to how to invest in socially responsible mutual funds. Before you make any final decision and put your money in such a fund, make sure you check the investment strategy and holdings of that particular fund. There are many companies that though claim to be socially responsible, but in reality they don’t actually keep their promise and meet investment criteria. To avoid such things you must check the prospectus well before you invest the money. If the criteria match with your beliefs and values, you can carry on. Socially responsible mutual funds are good way of investment according to your values. However, you must invest in different funds or diversify the investment, in order to minimize the risk involved in investment in private mutual funds.

Suzanne Brooks is a finance editor at Emortgagecalculator.co.uk . She writes blogs and articles on different topics like debt, mortgage, investment etc.