The beginning of a new year is often a time when people plan how to allocate their charitable dollars. Typically, that means selecting the charities that go hand in hand with their passions and deciding how much to donate. But there's also a way to align your investments and values that can make you feel good while you make money.
Socially responsible investing has been around for more than 50 years, but since then, the number of choices in mutual funds and investment styles has grown significantly. "If you want your investments to align with your values, you can find good investment opportunities that have a social mission," says Jennifer Murtie, director of client services at Federal Street Advisors in Boston.
For example, she says, there are U.S. equity managers investing in companies with an environmental mission, practiced through energy efficiency or recycling. Other funds might focus on how companies are run -- paying fair wages to employees or demonstrating a commitment to diversity, for instance.
But by emphasizing their social conscience, many investors are worried they'll lose out on investment performance. With so many funds available, that shouldn't be a concern, says Murtie. "From an investment perspective, you can build a diversified portfolio of managers across all asset classes," she says, but adds that due diligence is still required to ensure you have the best. "We look for exceptional investment managers focusing on these social factors and hold them to the same standards as any other investment managers."
So how can average investors find mutual funds that align with their personal values? Murtie suggests searching The Forum for Sustainable and Responsible Investment's website, which lists all mutual funds with a social mission by category. "If you're passionate about human rights, for instance, you'll be able to choose among several funds" with that mission, she says.
But Murtie cautions that you'll still have to do the same due diligence as you would on any investment: Read the fund's prospectus, research the manager, understand how it invests, know the risks and make sure the fund's goals match your own time horizon and investment needs.
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