An ethical fund has strict guidelines that are put in place to limit investment activity to companies that operate ethically. They have the investor’s values, such as religious, social, and morals, as primary and profits as a secondary consideration. They address issues like the treatment of workers and environmental and political issues like war, terrorism, and the manufacture of weapons.
Ethical funds’ guidelines can direct fund managers on which kind of investments to invest in and which to avoid. When choosing these funds, it is vital to ensure their goals align with your beliefs, principles, and values. Below are four key things you should consider when choosing an ethical fund.
- Your Ethical Principles and Values
Notions of what is and is not moral differ from one person to another—finding an ethical fund that aligns with your beliefs and moral values is essential. There are thousands of such funds to choose from, and finding the right one should be a priority.
Which cause would you like to invest in, and which fund best supports that cause? You should seek to answer this question as you research for a fund that aligns with your values and interests.
- The Fund Manager
In an ethical fund, the fund manager controls your money. To understand their drive and objectives, you need to know your manager’s background, experience, and expertise as an investor. Look keenly at their track record, projected performance, strengths, and weaknesses, approach to ethical investments, values, working culture, talent, and philosophy.
Your choice of a manager is highly dependent on your findings. Carefully look at those you can work with and which ones to avoid. The right manager should have values and principles similar to yours.
- Your Investment Goal
Every investor has a goal they want to achieve, and ethical funds have different purposes. Social funds are best for short-term investments, while ethical businesses and sustainable funds work for long-term investments. Knowing your investment goals gives you a clear timeline for the investment and which fund is right for you. Investing money in a noble cause should leave a positive footprint in the world.
- The Fund’s Holdings
Knowing what a fund invests in is critical when picking one. The fund’s fact sheet often has the top 10 holdings and the percentage of the fund’s value for every company. Sometimes getting an up-to-date list of holdings is complex because companies are only required to publish one twice a year. However, some managers post updated lists of holdings, often making them easy to find.
By looking at a fund’s holdings, you will understand its investment strategy and determine if it adheres to ethical principles. You will also be able to identify any likely conflicts of interest, thus, settling for the best ethical fund for you.
Ethical funds help you to invest in causes that make a difference in society without sacrificing your values and social, moral, and religious principles. By knowing which principles and values you want to uphold, investing in an ethical fund is the way to go, as it positively impacts the world.