Best Mutual Funds for Socially Conscious Investing

Best Mutual Funds for Socially Conscious Investing

This blog has truly been an adventure. Originally, I started this blog to keep myself in check and track my progress to financial independence. I have been somewhat successful over the past few years in reducing debt and increasing my overall net worth. A wonderful side benefit of this blog is that I get e-mails asking for my advice. Those e-mails have increased over the past couple of months. Now it isn’t a lot. I get maybe 10-15 per week (which is much more than the 1-2 a week I got over a year ago). And I must say that I love it. I love financial coaching and mentoring. It gives me an incredible high to help people because in turn they help me.

Recently, I got an e-mail that inspired this blog post. A first-time reader of the blog (and truth be told one of my former students) wanted to start investing, but wanted to do it in a socially conscious way. She just didn’t want to invest in companies that she didn’t agree with, but also wasn’t comfortable buying individual stocks.

I asked her if I could use her question as a blog post and she agreed.

The Best Socially Conscious Index Funds

Socially conscious investing, I think, is going to become a bigger part of the investing industry over the next decade. Millennials are the most socially conscious generation we have ever had and often put their money where their mouths are when buying certain products. Millennials are also the largest generation in terms of population that we have ever had. Unfortunately, most millennials (like a lot of Americans) aren’t investing much for retirement.

There are several reasons for this which include: not understanding basic investing; coming of age during the Great Recession when stocks tumbled by over 50%; not having the money to do so; or perhaps not necessarily thinking they need to invest at the moment. Many people in their 20s and 30s think that retirement is too far away. Unfortunately, the longer you wait the more money you will need to save and the greater chances you will have to live longer and may not secure the retirement you desire.

I am huge believer in index fund investing. Instead of trying to decide what specific companies to invest in socially conscious investors should look to mutual funds, particularly index funds to participate in the market.

An index fund, just as a reminder, is a form of passive investing where the investor, in essence buys a stock market index. For example, you could buy an S&P 500 Index Fund. That fund basically mirrors what the S&P 500 index does. There are tons of advantages to index funds and you can read about them in previous blog posts. But if I was doing socially conscious investing these two funds might be some I choose:

Vanguard FTSE Social Index Fund–this fund contains primarily large capitalization stocks, although some smaller ones as well. However, this fund doesn’t invest in companies that produce alcohol, tobacco, or pornography. They stay away from large companies that derive most of their funds from military sales. They must demonstrate diversity in the workplace and not have engaged in human rights abuses.

TIAA-CREF Social Choice Equity— for my teachers out there you might consider this fund which is benchmarked to the Russell 3000. It gives consideration to Environmental, Social, and Governmental factors and provides wide exposure to the U.S. equity market.

There are certainly more socially conscious index funds out there. However, in conducting my research these two constantly came up. Both have fairly low fees and have provided comparable returns to their indices. If you have these two in your 401ks or have an IRA and want to make socially conscious investing part of your portfolio I hope you consider these two funds.

As always, do your own research first. Read the prospectuses. Talk with other people. And make a truly informed decision. Learn about what you are going to be investing in.

2 thoughts on “Best Mutual Funds for Socially Conscious Investing

    1. I think it is a good shift and will probably lead to the development of more funds. I do hope so because the choices aren’t the greatest.

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