It
Pays to Be Good
By John
Spence, Contributing Writer
Socially responsible mutual funds were
first introduced in the early 1980s, but until recently
their performance has lagged the market. The "sin
stocks"- those involved in tobacco, weapons development,
nuclear power, and pornography-outperformed socially
responsible funds for those who didn't mind profiting
from polluting our environment, bodies, and minds.
With tech stocks flourishing today, however, socially
responsible investors are seeing their returns grow.
Although each fund has different qualifiers
for what is considered "socially responsible," most
put a high priority on a clean environmental record,
a focus on employee relations, workforce diversity,
and product safety. The Noah Fund, for example, is
a large-cap growth fund based on Judeo-Christian Biblical
principles. The
Noah Fund shuns new media companies involved in
pornography, healthcare companies involved in abortion,
and even Disney for its R-rated movies. Well hallelujah,
the Noah Fund has gained twice as much as the Standard
& Poor's 500 (S&P
500) in the past three years.
According to the
Social
Investment Forum, nearly $1 of every $8 under
professional management in the United States is in
a socially responsible portfolio. With a variety of
socially responsible funds, it is likely that each
investor will find a fund that matches his or her
own beliefs. The
MMA
Praxis funds are aimed at Mennonites, Amana funds
are geared towards Muslims, and Catholic Values funds
are designed for Catholics with a less fundamentalist
Christian outlook than the aforementioned Noah Fund.
Some funds have strict guidelines for what will keep
a company out of their portfolio, while other funds
will include offenders who are taking steps to curb
their "sinful" behavior and business practices.
With all the choices out there, it is
hard for index fund investors with a conscience to
determine where they should invest. Here's a sampling
of socially responsible index funds for passive investors:
Domini
Social Equity and Citizens
Index earn 4-star ratings, but these funds have
a downside: they're both relatively expensive. Citizens'
1.58% expense ratio is higher than that of most large-cap
index funds, and although Domini's 0.98% expenses
are lower, they are still above average. Sophia Collier,
who runs the Citizens Index, also manages their Small
Cap Index. This fund is also expensive. Citizens is
charging an expense ratio of 1.55% for the Small Cap
Index, which is high when compared to the average
small-cap index fund's expense ratio of 0.65%.
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