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Mutual Fund Transparency

Mutual Fund | Socially Responsible Investing | Buffalo, NY | New Orleans, LA | Certified B Corp 

Mutual funds have always had an appeal to novice and experienced investors. They offer the unique opportunity for individuals to affordably diversify their investment portfolio at the cost of just purchasing one fund. This unique affordability has made mutual funds a preferred choice in some circles interested in offsetting no-systematic risk by capturing a percentage of holdings across all sectors, without having to invest the large sum of capital it would take to diversify on ones own. However, investor preferences are changing, or at least more people are becoming aware that their personal ideals do not need to be excluded from their investments. This leads to the question how well do investors know their holdings?

While Funds make their holdings available for investors to see, these lists are usually extensive, and investors may not know what every company does, or if it conflicts with their personal beliefs.

Does an investor who has dedicated most of their life to combating climate change want to indirectly invest in gas and oil companies? What about tobacco, alcohol, and firearms? Should investors looking for ways to diversify their portfolios to combat market volatility be excluded from the decisions made by portfolio managers of where their money goes?

While it would be impossible for a portfolio manager to meet the needs of every investor in the world, it is possible to fulfill the needs of specific archetypes of conscious investors and give them the power to screen and find the funds that best fits their needs.

The New York Times published an article on Friday about the tools funds are now using to make investing more accessible to individual needs.[1] While it notes that socially responsible investing is not a new practice, it has been convoluted by mainstream terminology and buzzwords. In other words, some companies have made the mistake of putting conscious investing into one box rather than treating it as an individual philosophy, unique to each investor.

One of the most important and consistent trait that successful socially responsible investment funds have is communication. The screening process, not just for the companies the fund owns but also for the investors. There needs to be a line of communication. Some investors may not know this is an option unless they are told.

Socially responsible investing has a long history, and with developments by major market forces like Blackrock, Goldman Sachs, and now JP Morgan Chase[2] opening their own socially responsibly funds, it isn’t going anywhere.


Views expressed are the opinions of Jeffrey Goldfarb and the Financial Advisors at Goldfarb Financial and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Investors should carefully consider the investment objectives, risks, charges and expenses of mutual funds before investing. The prospectus and summary prospectus contains this and other information about mutual funds. The prospectus and summary prospectus is available from your financial advisor and should be read carefully before investing.

[1] https://www.nytimes.com/2018/03/02/your-money/why-its-so-hard-to-invest-with-a-social-conscience.html?smid=tw-share

[2] https://www.bloomberg.com/news/articles/2018-03-06/jpmorgan-quants-pitch-higher-frequency-data-for-esg-stock-picks

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