Investing with a good conscience: Dreyfus offers a mutual fund that's socially responsible.

If you want to be a politically correct investor, consider the Dreyfus Socially Responsible Growth Fund. You'll be supporting companies that are deemed socially responsible but without scrimping on your investment returns. The $460 million fund has done quite well, posting a one-year growth rate of 36.19% through the end of the first quarter of 1996. This puts it in the top 13% of all growth funds and in the top 6% of all equity funds.

In general, socially responsible mutual finds seek capital appreciation while investing in companies that do not conflict with certain social priorities. For instance, the Dreyfus Socially Responsible Fund avoids campanies that promote such social vices as smoking, drinking and gambling. "Our intention is to prove that you can still make money and be socially responsible," declares Maceo Sloan, who is co-manager of the fund and chairman, president and CEO of Sloan Financial Group. Stephan A. Jackson, equity portfolio manager and director of equity research at NCM Capital Management Group, is the other co-manager. Both Sloan Financial and NCM are based in North Carolina.

According to jackson, investors can feel good about investing in a fund that will benefit their children by not promoting companies that trash the environment. "They are also getting a competitive return that makes their retirement plan look good." This no-load fund offers a monthly payment plan of $100. The minimum initial investment is $1,000. (Call 800-645-6561 to order a prospectus.)

Sloan and Jackson have been managing the fund since August 1994, which includes picking stocks. But the companies they choose must pass muster with internal analysts plus two other portfolio managers. Then there's the social screening process set up by the Dreyfus Corp., a New York-based mutual investment finds company.

The screens include such socially sensitive areas as consumer protection and product safety, environmental protection, occupational health and safety, and equal employment opportunity.

There have been times when a financially, sound company failed the screening process. For example, Sloan recommended Circus Circus, a gaming and entertainment business, which was poised to do well. Still, the stock wasn't approved by Dreyfus because of the negative social associations connected to gambling. "It means that the find managers have to be more creative in finding companies that will pass the test," says Diane Coffey, who was in charge of the social screening process at Dreyfus and formerly served as co-portfolio manager of the Dreyfus Third Century Fund, a social investment stock fund.

There are some downsides to socially responsible investing. "For successful investing, you need the ability to use all of the markets without barriers," says Jon Teall, a spokesperson for New York-based Lipper Analytical Services, which tracks the performance of mutual funds. "Socially responsible funds, by their nature, have barriers, which can make a difficult job [of picking stocks] almost impossible."

Nonetheless, in the first quarter of 1996, the Dreyfus Socially Responsible Fund was up 7.04%. According to Teall, the fund's success is based on a good combination of technology and S&P-type companies; the emphasis is on those that have shown fast growth, since the market has been particularly good to that group recently.

There are currently 56 stocks in the fund, of which 27% are in technology, compared with 21% last year. Sloan says he has few problems with technology stocks when it comes to social screens. "Most technology companies are environmentally friendly," he notes.

Companies in the fund that have performed particularly well include Regal Cinemas, the eighth largest movie exhibitor in the country. jackson says the stock is up 120% since he bought it in early 95. Another strong performer is Sun Microsystems, which, along with Citicorp and Fannie Mae, has tripled since it was bought a year ago. Other holdings include Neopath, Merck & Co. and Gillette. The fund's largest holding is Johnson & Johnson.