Green Mutual Funds

The Green mutual funds are a subsector of the Socially Responsible funds that restrict their investments to companies that are actively involved in environmentally friendly businesses such as power generation with windmills or the production of alternative fuels, companies that have implemented energy-saving and non polluting processes on a large scale, companies that produce environmentally friendly products, and companies that produce such things as solar panels for the generation of electricity. There's definitely some overlap here with the Alternative Energy funds.

Although the Green funds have been around a bit longer than the Alternative Energy funds, they're still relatively new and few in number, so there is no established benchmark for the category and, like the Alternative Energy funds, they must be evaluated on short-term performance and qualitative factors, such as one's evaluation of a fund's management and selection of securities. However, as green investing is becoming more popular, look for the selection in this sector to increase.

If you don't find the Green funds listed separately, then you'll probably find them listed with the Socially Responsible funds.

The Green funds may have some diversification potential, but they'll have to establish a longer history before that determination can be made. They are unique, but that doesn't necessarily mean they won't display a high degree of correlation with the general market. Only time will tell. For now, Green funds look like they may provide some diversification within the energy sector and provide a vehicle for green investing, thus offer you an opportunity to invest with a clear conscience.

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