Socially responsible mutual funds appeal to investors who want to marry their investments to their social principles and avoid supporting causes that they feel are harmful. These funds attempt to look at more than a company's bottom line before deciding to commit their investors' capital. Many of these funds consider such factors as environmental protection, equal employment opportunity, the manner in which a company's employees are treated, and the level of honesty a company displays in its advertising.
I can certainly understand the desire to put your money where your mouth is; unfortunately, however, socially responsible funds have failed to bridge the gap between theory and practice. If you blindly plunk down your money on such a fund, you may be disappointed with what you're actually getting. Bear with me as I explain.
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