In 1987 Calvert Funds launched two socially responsible mutual funds that screened out companies with activities in tobacco, alcohol, gambling and weapons – the “sin” stocks. Investors wanted to align their social beliefs with their investment choices. Today SRI (Socially Responsible Investing) and ESG (environmental, social and governance) investing is a growing segment of investment options.

There are many funds that avoid or favor investments for moral, social, environmental or religious reasons. There are 100 SRI or ESG funds in the Morningstar database, but that number does not include religious oriented mutual funds. The market has grown from around $200 billion in 2007 to over a $1 trillion in 2012.

Fund families tend to specialize in SRI or ESG investing. Some of the largest fund families are Parnassus, Domini and Walden. Beyond the sin avoidance categories, the industry has widened out to avoid pornography, poor labor practices, fossil fuels, and countries with poor social and environmental records. Other funds have screens that favor shareholder advocacy, community investing, companies that consider social and environmental issues in their decision-making, countries with good social and environmental policies. Some funds align with the principles of religious beliefs. Other funds are focused on one issue such as alternative energy, environment, clean water, etc.

Most of these SRI and ESG fund families also use shareholder advocacy programs, such as letter writing, proxy voting and resolutions to influence corporate behavior.

Socialfunds.com is a good information source on SRI and ESG funds. Sustainablebusiness.com, Morningstar and Lipper also have information on these funds.

A few funds in the wide variety of SRI and ESG funds are:

Portfolio21 – ESG fund family

Amana Funds – Islamic principles

Praxis Mutual Funds – stewardship investing

Eventide Funds – biblical principles.

Green Century – Environmental fund family

Guggenheim Solar ETF – solar energy companies

WilderHill Index – Clean Energy Index 

So you can invest with your conscience. As always, it is up to you as the CFO of your life to do the research on your investment choices.

There is no good evidence that SRI and ESG funds as a group do better or worse than the market in the long run. Some funds outperform the market and others do not.  Investors need to be satisfied with the balance between social, moral, religious beliefs and financial considerations.

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If your only long-term savings are in your 401k/403b/457 plan, you choose from investment options your plan provides. Your employer should provide education about those options. Ask your Human Resources representative when the next session is scheduled. A limited universe makes the investment selection manageable.

If you have an IRA or other savings the universe of investment options is much greater. You can research investment options yourself and make reasoned decisions. Mutual fund companies, brokerage firms and others have websites that offer information to help you become an informed investor.

If you have friends, family and/or co-workers that have an interest in investing, form an investment group where you can pool your knowledge and talk out your questions. Discussions of investment books and articles within this group can improve your financial literacy.

There is also the pool of parents, siblings, and close friends who are experienced in investing their money. Remember that you do not act on investment advice until you have done your own research. Your income, spending habits, time horizon and risk tolerance are unique to you and don’t always match up to someone else’s investing strategy.

Many people are overwhelmed by the vast amounts of information out there on investments and they want the help of an expert advisor. The best way to compensate a financial advisor is the payment of an annual flat fee rather than a percent of assets for advice. But with limited savings it is difficult to get personal advice at a reasonable price.   For example, if you have limited assets a $2000 annual fee for financial advice is too expensive. 

So a number of companies have sprung up to give you financial advice that costs you less money.   Many of these companies offer more automated investment advice versus personal advice. Others pair you with a planner in your area. Here is a list of some of these websites 

Betterment                                  Wealthfront

Learnvest                                    PersonalCapital

WiseBanyon                                 XY Planning Network

RebalanceIRA                             MarketRiders

No matter if you go solo on your investment choices or get some help, you still need to be the CFO of your life. You cannot give someone else total control of your investment decisions. You should understand the decisions and be comfortable that the investments match up with your goals and risk tolerance. Don’t be afraid to ask any question.

Kowalczyk reminder: Common mistakes of investing are: trading too frequently, Getting swept up in market euphoria, Freaking out with market changes, Putting all eggs in one basket, Failing to rebalance regularly

Warren Buffet of Berkshire Hathaway maxims for stock investing: Stick with quality names and brands, Buy & hold is often the best strategy, Don’t be swayed by daily market fluctuations, Bearish markets present buying opportunities, Diversity and keep trading costs low