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Socially responsible funds hold their own

By Guy Halverson / May 29, 2001



QHow have socially responsible mutual funds been doing during the recent stock-market downturn? Are "good works funds" still considered good investments?

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D.R., New York

AYes, indeed, according to an analysis by financial information firm Morningstar Inc., in Chicago. They are down slightly, but far less than the overall market.

For the 12-month period ending May 21, the 96 socially responsible funds tracked by Morningstar (including all share classes) were down a modest 1.8 percent, compared to a larger loss of 5.6 percent for the Standard & Poor's 500 Index.

That means, according to a Morningstar analyst, that the socially responsible funds should break to the upside much faster than more conventional funds when the market fully rebounds.

QIn a recent article on investing in foreign funds, an expert that you quote, Sheldon Jacobs, editor of the No-Load Fund Investor, recommended investing in broad-based mutual funds that hold stocks from different countries. Yet, in your table of top-performing funds, the only funds listed are by specific regions. Explain the discrepancy, please.

T.T., via e-mail

ARegional or specific country funds tend to outperform broad-based funds - often called "global" or "international" funds - which smooth out, or dilute regional returns. But analysis by Morningstar shows that regional or specific country funds are also very volatile. We chose to carry charts of such funds' performances to illustrate that volatility: Sometimes, as happened with Latin America funds a few years ago, or Russia funds, the downturn is stunning.

Meanwhile, broad-based funds chug along - usually more slowly and safely.

QI am in my early 30s. Is there any advantage to keeping part of my 401(k) plan in bond funds?

K.K., Boston

A"Yes," says Tim Schlindwein, a mutual-fund expert who heads up Schlindwein Associates in Chicago, since many bond funds are currently doing very well.

"At your age, you could probably afford to be very aggressive - since you will have many years to invest," Mr. Schlindwein says. "But you may find a need to borrow against the fund someday," in which case "ensuring account stability," an attribute of bond funds, will be important.

(c) Copyright 2001. The Christian Science Monitor