5 Tips For Comparing Ethical Stock Funds
When you invest in stocks, your goal is to gain money. But how do you make sure you’re investing in the right stock fund? Does a stock fund have to be unethical to produce high returns? And what are the most important things to look for when selecting a new stock fund?
An investment company may advertise their stock fund as being ethical and green – or anything else that appeals to investors. However, it’s not enough to trust the company behind the fund. You need to investigate exactly what makes the fund ethically sound before you invest your money.
Read on for some helpful suggestions on how you can find a truly ethical stock fund.
Armed with these tips, you can search for ethically-minded exchange-traded funds (ETFs) and mutual funds that support companies with responsible business practices.
1. Research the Management of the Funds
The ethical management of a stock fund begins at the top. Before you invest in a stock fund, find out who is managing the fund. Find out:
- Who are the fund managers? How long have they been managing funds?
- If the fund is using a team of experts, do they have a track record of ethically investing?
- Are they certified financial planners (CPF)? How much money do they manage?
You also want to find out if the fund managers are held to any particular ethical standards. Some fund managers are accredited investment engineers (AIE). These individuals must meet specific ethical standards for their work.
2. Check For Conflicts Of Interest
Conflicts of interest are common in financial investments. When a company or individual has a conflict of interest, their motivation for investing in a company is not purely profit-driven. They may have another agenda than profit, like a desire to control a certain industry or product, a desire to promote a certain political agenda, or a desire to do some social good.
When assessing the ethics of a fund, you want to avoid funds with conflicts of interest. What is the investment company’s motivation for investing in these stocks?
If a fund manager has a personal interest in a company, you have to wonder why they would invest in it. Are they hoping to make money from investing in this company? Or do they have a preference for this company because they want to control it, promote a political agenda, or do some social good?
3. Look At The Fund’s Track Record
An ethical stock fund can make you money. But do these kinds of funds deliver on their promises? If a stock fund is ethical, you want to know if it has a strong track record of investing ethically. How long has the fund been in operation? Where has it invested? You can find the track record of any stock fund online.
Simply visit the fund’s website and then click on “performance.” You can also find the track record of ethical stock funds at reputable stock investment websites, like Sharebuilder. What do the track records of ethical stock funds look like? Are these funds investing in ethically-minded stocks?
4. Find Out Where The Fund Invests In
Ethical investors have strict standards for the companies they choose to invest in. They want to make sure their investments contribute to a better world. You can find out where an ethical stock fund is investing by reading the fund’s prospectus. Most ethically-minded stock funds post their current prospectuses online. If the fund’s prospectus is not online, you can request a copy from the investment company. The prospectus will tell you where the fund is investing in. Ethically minded stock funds invest in companies that promote a more sustainable future.
5. Look At Past Performance
Ethical stock funds can be great investments. But you have to make sure you are selecting the right fund for your goals. What are the fund’s average returns? Have there been any major downswings in the fund’s performance? You can find the past performance of any fund online via the fund’s website or reputable stock investment websites, like Sharebuilder.
In Conclusion
In the realm of investing, there are various ways to play the market. There are different stock market funds that investors can choose from. There are numerous mutual funds and exchange-traded funds (ETFs) that offer great opportunities for investors. Within these stock market investing options, there are also many ethical investing funds that have become quite popular in recent years. These tips highlighted above will help you find truly ethical stock funds, making sure your investment is socially responsible and profitable at the same time.
