Should you invest in socially responsible funds or socially responsible stocks?

Written by SRIStocks.com

Socially responsible investors choosing between SRI mutual funds, socially responsible investment funds, socially responsible funds, and socially responsible stocks are faced with certain advantage and drawbacks when it comes to SRI investment returns and SRI investment performance, which impact the profitability of social investing, socially responsible investing, green investments, and sustainable investing.

Most socially responsible investors interested in socially conscious investing are faced with the dilemma of choosing between socially responsible investments funds or socially responsible stocks. Whereas the bulk of socially responsible investors place their investments with socially responsible mutual funds, there are certain advantages to directly trading socially responsible stocks

Most investors invest with socially responsible investments mutual funds use they are not confident in their ability to select stocks that will yield positive SRI investment returns. In addition, conducting the extensive research required into a corporation's environmental, social, and governance practices may extend beyond the resources of the average retail investor interested in social investing.

Investing in a socially responsible investments fund is certainly easier, as the fund manager oversees the dynamics of the portfolio, but there are certain drawbacks. First, there are the notorious costs associated with socially responsible mutual funds, including expense ratios, front and end loads.

However, with these costs, you do obtain several additional benefits as a socially responsible investor, such as full diversification without having to invest a significant amount of money. If you were to mimic the same number of trades to achieve this diversification with socially responsible stocks, the commissions and fees would significantly reduce your socially responsible investment returns, especially for portfolios below $50,000. With that said, socially responsible stocks allow you to specifically choose who you would like to add to your socially conscious investing portfolio, and it also provides you with an opportunity to gain (or lose) from market exposure as a socially responsible investor.

When you are choosing a socially responsible investments fund, it is important to keep in mind that not all socially responsible funds practice the same level of social screening; in fact, some socially responsible investments funds that simply do not invest in tobacco are considered "socially responsible." On the other hand, some socially responsible mutual funds specifically purchase "irresponsible" stocks in order to engage in shareholder advocacy, prompting change within the organization.

Rating services, such as NIS Social Rating , rank SRI mutual funds based upon their comprehensive levels of screening. You can also review the Social Investment Forum , Social Funds , and Green Money for ratings, socially responsible investment performance, and reviews of socially responsible investments mutual funds.

Researching for socially responsible stocks for your portfolio is more time and resource-effective when you employ the efforts already exerted by other parties. With plentiful socially responsible investing resources, such as Money Wisdom , Good Money , and Clean Edge , you can build a strong foundation upon which to create your socially responsible stock portfolio.

Sustainable Business , an independent newsletter publication, provides annual reviews on the world's top 20 sustainable, socially responsible stocks. Focused on socially responsible stocks of companies that strive to increase their sustainability practices, or are the origins of green investments technology, the Sustainable Business 20 List is a great place to begin your research as a socially responsible investor.

According to Rona Fried, Ph.D., Sustainable Business CEO and Editor of Progressive Investor , there are many more socially responsible stocks available to the investor: "Over the past six years, we seen the universe of companies we have to chosen from grow larger and we've seen it deepen. Early on, we were just happy to see companies that were doing something sustainable. Now companies have to go beyond just having a green product, to changing their internal operations."

With the growing availability of socially responsible investments funds, social investing ETFs, and socially responsible stocks, socially responsible investors - now more than ever - have diverse options when it comes to sustainable investing.

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