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5 June, 2018

Be a Super Investor – Make Money While Saving the Planet

Posted in : Retirement on by : Dave Doe

Clean energy and companies that are socially and environmentally responsible are growing like never before. When you invest in mutual funds that are listed as socially responsible, you are not only helping companies that are building green infrastructure and finding alternative and cleaner ways to produce energy and other eco-friendly services and products, you may also be avoiding the volatility of owning individual stocks.

What is a Socially Responsible Mutual Fund?

Mutual funds that invest in companies with a focus on environmentally sound business practices or a strong human rights philosophy are considered socially responsible. These funds typically avoid investing in companies that make tobacco or alcohol or promote gambling. They also may avoid companies that work for or support the defense industry.

Mutual funds are always a good investment strategy. You gain the advantage of diversification, which can significantly reduce your risk.

Do Socially Responsible Mutual Funds have a Stigma?

Many investors and some media outlets have painted a picture of socially responsible investors as starry-eyed idealists. While some individual investments have not fared well, overall the numbers tell a different story.

When the stock market crashed in 2008, the S&P 500 lost 38.5 percent of its value. By contrast, stocks classified as socially responsible only lost 32 percent. When the S&P rebounded in 2009 and rose 23 percent, socially responsible stocks rose 28.4 percent.

According to the Social Investment Forum, a trade group that serves investors in socially responsible stocks, 65 percent of 160 socially responsible investments outperformed their expected benchmarks in 2009.

Parnassus Workplace and the Appleseed Fund

Two prime examples of socially responsible mutual funds are Parnassus Workplace and the Appleseed Fund.

Parnassus Workplace chooses companies to invest in based on their employee-treatment track record. When founder Jerome Dodson created Parnassus Workplace in 2006, he did so based on a trend that he had noticed: Companies that were consistently chosen by Fortune Magazine for the annual “100 Best Companies to Work For” list typically performed very well.

The fund has since been a top performer as well and is a top-ranked mutual fund, according to U.S. News & World Report.

Like Parnassus, the Appleseed Fund makes a point in investing in companies that are working to promote human activities and are highly active within their communities. Sustainability and environmental friendliness are other key qualities the fund seeks. The fund specifically avoids companies with connections to alcohol, tobacco, gambling, pornography and weapons.

Choosing Socially Responsible Investments

Different people and different fund managers may have conflicting ideas about the definition of social responsibility. If you’re ready to make the switch to socially responsible mutual funds, you may need to do some background research. Talk with your investor and find out which stocks make up the fund you are considering. Before making your decision, take the time to research these companies for yourself. Are they truly holding to the ideals of social responsibility? Most importantly, do they adhere to your personal concept of social responsibility?

Social responsibility, in some cases, is in the eye of the beholder. Some may consider companies promoting certain religious viewpoints to be socially responsible, and others may disagree. Other questions you should consider are:

Do you consider nuclear energy to be a green energy source?

If a company that pollutes is now making an effort to go green, should they be considered socially responsible?

How do you feel about companies that support agriculture but aren’t necessarily organic?