Is This a Good Investment, and How Do These Funds Work in My Portfolio?

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Is This a Good Investment, and How Do These Funds Work in My Portfolio?

Just because you want to invest with your heart doesn’t mean you should risk losing your shirt. Socially responsible investing funds can perform just as well or even better than their non-socially screened peers. But there are some poorly performing SRI funds out there, and you should avoid those as you would any bad fund.

Also, find out how expensive the fund is. You’ll probably have to pay more for your socially screened funds. That’s because such funds are typically smaller than their nonscreened peers, and smaller funds tend to have higher expenses. Higher expenses may also reflect the additional research required to determine whether or not a company passes the fund’s social screens.

How do they work in my portfolio?

Do you want an entire portfolio of funds that match your values, or are you comfortable with just one or two SRI offerings? There are socially responsible funds available in all major asset classes, although they’re not equal in quality or quantity. SRI funds focusing on U.S. companies are the most plentiful. However, there are fewer SRI bond and international funds.

If you can’t find enough suitable funds to build an all-SRI portfolio, you might simply choose one SRI fund to serve as a good large-cap core holding. After all, the largest companies are likely to have the biggest impact on the issues you care about, so why not focus on the big guys? There are a number of respectable large-cap funds available to socially conscious investors, including Domini Impact Equity (DSEFX), Impax Sustainable Allocation (PAXWX), and Amana Income (AMANX).