Do Socially-Responsible Mutual Funds Perform better than Conventional Research Paper

Do Socially-Responsible Mutual Funds Perform better than Conventional Mutual Funds - Research Paper Example In addition, it includes incorporation of local communities in order to further its aim to achieve its goals (Schepers, 2009). Socially responsible investment has for years been viewed as the practice for individuals who are interested in social change and who aim to yield much profit at the end. There was a time when it was hard or difficult to establish a socially responsible portfolio that was competitive on market because the socially responsible investing universe was not large. But that is the past since time have changed in that in modern day there are more than 100 mutual funds that incorporate social screens in their management decisions which aim to improve their profits. Investors are in a position to create portfolio that is competitive and real to their social concerns. In addition, there exist more direct investment opportunities such as buying certificates of deposits with local or community banks (Vogel, 2006). Mutual funds Mutual funds are said to be investment capit al of distinct type. In this regard, investment fund refers to the variety of investments such as stocks, bonds and other types of funds. Mutual funds are different from most of distinct types of funds present. In this sense, mutual funds are referred to as open-ended meaning that as the number of people investing in the funds rises, the funds also increases its units in the market. Mutual funds concentrate on specific category of investment such as large firms stocks and government bonds of certain Nations. In addition, few of the mutual funds might slightly invest in combination of stocks and bonds in distinct mutual funds. For many years, investing in mutual funds has been viewed as safe mode of investment as it incorporates both individual capitals with many different investors, which makes investors to invest in different types of investment at less cost (Renneboog et al 2008). There are two different types of mutual funds investment namely; socially responsible mutual funds an d conventional mutual funds. The socially responsible mutual funds involve certain factors to consider while making decision concerning the firm to invest in. Socially responsible funds perform better because the funds apply their ownership rights to manipulate management via policy alteration or change suggestions. They ensure that this advocacy is attained through attending shareholders meetings, exercising voting rights in companies, writing letters to top management, and filing proposals. In most scenarios, it is very hard for shareholders to hold and exercise their voting rights. Therefore voting are attained via proxy. Many investors advocate socially responsible funds because they have strict policy that aim to maintain transparency in decisions and disclose all proxy voting procedures, policies and conducting voting rights of its shareholders (Schepers, 2009). On the other hand, the conventional mutual funds is concerned with the prospects and financial performance of firms combined with significant factors while investing. Discussion Over the years, there has been a tremendous increase in the number of socially responsible mutual funds. The issue of social investment has been subject of debate for many years. However, the modern manner of investment has been because of financial crisis that began in 1930s. At that time, there were many issues available