The Top 10 Best (and Worst) Performing Socially Responsible Mutual Funds

Thursday, January 7, 2016

Socially responsible investors seek businesses and industries that meet strict investment standards and seem poised to generate strong returns, while also promoting societal improvements. Likewise, these investments avoid industries that go against health and sustainable objectives, such as the alcohol, gambling, firearms and nuclear industries, among others. A study published by Santa Clara University shows that socially responsible investments (SRI) don’t pay adversely for their niche focus. According to the study, “The return advantage of tilts toward stocks of companies with high social responsibility scores is largely offset by the return disadvantage that comes from the exclusion of stocks of ‘shunned’ companies.”

However, many funds still underperform relative to their benchmarks. As Morningstar reports: “… Social impact funds returned about 5 percent a year over the past 10 years, lagging behind large-cap funds by 1.1 percentage points a year,” according to Bloomberg.

While there are numerous socially responsible investments, a mutual fund provides individual investors with a way to diversify investments among a variety of bonds, stocks and other securities. But despite this diversification, there’s a big difference between the mutual funds that perform and those that offer paltry returns — or worse, negative returns.

Source: Arizona Daily Star (link opens in a new window)

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