When it comes to mutual funds–and index funds to some extent–there are thousands and thousands of options. A wise man once wrote this:
…you can pick a mutual fund of almost any imaginable type, based on many factors (e.g., risk, return, sector, geographic area of investment, etc). For example, you could invest in a value fund, an emerging-markets fund, or a medical-device fund.
That man was me, and I wrote it on this very site in All About Mutual Funds. Anyway,
I want to mention another type of fund to add to your toolbox: socially responsible funds. These funds are primarily concerned with making money (as they all are), but their second screen is a socially responsible screen. In other words, they generally don’t invest in tobacco, alcohol, or firearms manufacturers. Some of them are specifically focused on certain areas like the environment.
Not surprisingly, most of these funds don’t provide the most spectacular returns. However, when you invest, you know that you’re being socially responsible. If that’s important to you, then the premium you pay may well be worth it.
Some good places to get started:
–Socially Responsible Investing: Making a Difference and Making Money
-A description of socially responsible funds from SocialFunds.com