ALIGN YOURSELF WITH THE FUND PHILOSOPHY

If you find that the basic investing philosophy described in the prospectus is not aligned with your values, then that’s a pretty good tip-off that this may not be a fund you should be investing in. On the other hand, you may find a fund that specifically states it is designed to address a specific set of issues—for instance, to ensure gender diversity, empower women, or reduce exposure to fossil fuels. In addition, you can see if it is using ESG screens—in other words, excluding companies that do not meet certain environmental, social, and governance guidelines. Also look to see if it is focused on big companies (large-cap) or smaller ones (small-cap) that may be more volatile and therefore offer more risk but also more possible gain. All of these are laid out in the prospectus. Also, check to see if it is diversified. This means that it holds stocks and bonds from a broad range of sectors. For instance, an undiversified fund may be focused only on information technology but not on industrials, telecommunications, or healthcare.