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4 Socially Responsible Funds to Invest in for Solid Returns
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In recent years, impact investing — picking funds with a specific environmental or social theme like green bond funds or clean energy funds — has gained prominence. This is because many investors have realized their responsibilities toward the society. Furthermore, one should also understand the impact of the change that comes with a shift in the consumer market as it has become increasingly thoughtful and interested in “ethical consumption.”
Per a Morningstar report, in the second quarter of 2020, the U.S. market had $10 billion money flowing into ESG funds. Morningstar’s report also states that assets under management in funds that abide by ESG principles have surpassed $1 trillion for the first time.
Since the coronavirus outbreak, ESG funds have attracted even more assets amid increasing demand for climate-aware and socially-conscious funds. One big reason for this is that socially responsible funds generally have little to no exposure to sectors such as energy that were hurt the most by the pandemic. Moreover, these funds are heavy on tech stocks which have by far been the best performers amid widespread market uncertainty.
Furthermore, the pandemic also shed light on the fact that health and environmental issues have now become a profound social problem and cause material governance challenges. Hence, companies adopting ESG policies are much better positioned even during the downturns.
Socially responsible investing takes into account financial returns along with social and environmental benefits. In fact, over the long term, fund managers believe that these low-cost strategies based on sustainability can compete well with the broader U.S. market and most large-blend funds.
4 Best Picks
Given the current scenario, it seems that ESG mutual funds can generate greater and stable returns for investors. Hence, we have shortlisted four socially responsible mutual funds with a Zacks Mutual Fund Rank #1 (Strong Buy) that are well poised for gains. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Pax Ellevate Global Women’s Leadership Fund Individual Investor Class (PXWEX - Free Report) aims for returns on investment that exceed the price and yield performance of the Impax Global Women's Leadership Index. The fund invests most of its assets in securities of the components of the Women's index, the likes of which may include American Depositary Receipts, Global Depositary Receipts and Euro Depositary Receipts.
This Zacks sector – Global-Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PXWEX has an annual expense ratio of 0.80%, which is below the category average of 1.10%. The fund has three and five-year returns of 6.9% and 7.3%, respectively. Along with that, the fund’s minimum initial investment is $1,000.
Fidelity Select Environment and Alternative Energy Portfolio (FSLEX - Free Report) fund aims for capital appreciation. The fund primarily invests the majority of its assets in securities of companies that provide business services related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies or other environmental support etc. This non-diversified fund invests primarily in common stocks.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSLEX has an annual expense ratio of 0.85%, which is below the category average of 1.10%. The fund has three and five-year returns of nearly 2% and 6.4%, respectively. Additionally, the fund has no minimum initial investment.
New Alternatives Fund Class A (NALFX - Free Report) aims for long-term capital appreciation and considers income as a secondary objective. The fund primarily invests in common stocks of companies as well as other equity securities such as real estate investment trusts and American Depository Receipts etc.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has an annual expense ratio of 1.08%, which is below the category average of 1.28%. The fund has three and five-year returns of 10.4% and 8.8%, respectively.Along with that, the fund’s minimum initial investment is $2,500.
Parnassus Mid Cap Growth Fund - Investor (PARNX - Free Report) aims for capital appreciation. The fund invests the majority of its assets in mid-sized growth companies. However, 20% of its net assets may be invested in smaller- and larger-capitalization companies.
This Zacks sector - Sector- Large Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX has an annual expense ratio of 0.84%, which is below the category average of 0.92%. The fund has three and five-year returns of 7.9% and 8.7%, respectively. The fund’s minimum initial investment is $2,000.
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4 Socially Responsible Funds to Invest in for Solid Returns
In recent years, impact investing — picking funds with a specific environmental or social theme like green bond funds or clean energy funds — has gained prominence. This is because many investors have realized their responsibilities toward the society. Furthermore, one should also understand the impact of the change that comes with a shift in the consumer market as it has become increasingly thoughtful and interested in “ethical consumption.”
Per a Morningstar report, in the second quarter of 2020, the U.S. market had $10 billion money flowing into ESG funds. Morningstar’s report also states that assets under management in funds that abide by ESG principles have surpassed $1 trillion for the first time.
Since the coronavirus outbreak, ESG funds have attracted even more assets amid increasing demand for climate-aware and socially-conscious funds. One big reason for this is that socially responsible funds generally have little to no exposure to sectors such as energy that were hurt the most by the pandemic. Moreover, these funds are heavy on tech stocks which have by far been the best performers amid widespread market uncertainty.
Furthermore, the pandemic also shed light on the fact that health and environmental issues have now become a profound social problem and cause material governance challenges. Hence, companies adopting ESG policies are much better positioned even during the downturns.
Socially responsible investing takes into account financial returns along with social and environmental benefits. In fact, over the long term, fund managers believe that these low-cost strategies based on sustainability can compete well with the broader U.S. market and most large-blend funds.
4 Best Picks
Given the current scenario, it seems that ESG mutual funds can generate greater and stable returns for investors. Hence, we have shortlisted four socially responsible mutual funds with a Zacks Mutual Fund Rank #1 (Strong Buy) that are well poised for gains. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Pax Ellevate Global Women’s Leadership Fund Individual Investor Class (PXWEX - Free Report) aims for returns on investment that exceed the price and yield performance of the Impax Global Women's Leadership Index. The fund invests most of its assets in securities of the components of the Women's index, the likes of which may include American Depositary Receipts, Global Depositary Receipts and Euro Depositary Receipts.
This Zacks sector – Global-Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PXWEX has an annual expense ratio of 0.80%, which is below the category average of 1.10%. The fund has three and five-year returns of 6.9% and 7.3%, respectively. Along with that, the fund’s minimum initial investment is $1,000.
Fidelity Select Environment and Alternative Energy Portfolio (FSLEX - Free Report) fund aims for capital appreciation. The fund primarily invests the majority of its assets in securities of companies that provide business services related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies or other environmental support etc. This non-diversified fund invests primarily in common stocks.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSLEX has an annual expense ratio of 0.85%, which is below the category average of 1.10%. The fund has three and five-year returns of nearly 2% and 6.4%, respectively. Additionally, the fund has no minimum initial investment.
New Alternatives Fund Class A (NALFX - Free Report) aims for long-term capital appreciation and considers income as a secondary objective. The fund primarily invests in common stocks of companies as well as other equity securities such as real estate investment trusts and American Depository Receipts etc.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has an annual expense ratio of 1.08%, which is below the category average of 1.28%. The fund has three and five-year returns of 10.4% and 8.8%, respectively.Along with that, the fund’s minimum initial investment is $2,500.
Parnassus Mid Cap Growth Fund - Investor (PARNX - Free Report) aims for capital appreciation. The fund invests the majority of its assets in mid-sized growth companies. However, 20% of its net assets may be invested in smaller- and larger-capitalization companies.
This Zacks sector - Sector- Large Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX has an annual expense ratio of 0.84%, which is below the category average of 0.92%. The fund has three and five-year returns of 7.9% and 8.7%, respectively. The fund’s minimum initial investment is $2,000.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>