I'm confused about socially responsible investing, and so are some of my money-management clients. Several have instructed me to avoid all tobacco and defense stocks. I understand shunning cancer-stick purveyors, but disdaining all defense contractors strikes me as pacifist lunacy in a post-9/11 world. I marched on Washington during the Vietnam War, but I kind of like the idea of having a Defense Department.
I initially thought this column would be a screed against SRI. [Kiplinger's prefers the term socially screened investments to avoid implying that other kinds of investments are socially irresponsible.] After all, it's apparent from a pure money-management perspective that you virtually guarantee less-than-optimal results when you arbitrarily eliminate enormously profitable sectors of the investment world, such as alcohol and gambling. Underscoring that point is the mediocre performance of so many SRI mutual funds.
Make money any way
So I was going to trumpet my complete lack of scruples as an investor. (As recently as a year ago, I owned Halliburton. Enough said.) And I was going to encourage you to abandon yours, as well. After all, I was fat and happy with my quasi-moral mantra: Make as much as you can in the market however you can -- c'mon Halliburton -- then use the proceeds for your favorite causes.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It's easy to be snide about SRI. I've given money to the Sierra Club, but I wouldn't think of giving a nickel to the Sierra Club Stock fund, which has lagged Standard & Poor's 500-stock index in five of its eight full years in operation. Timothy Plan Large/Mid-Cap Growth fund, which favors "biblical" investing and avoids "sin" stocks like the plague, has lagged the S&P 500 by an average of six percentage points per year since its inception in late 2000. No ill-gotten gains there. And Citizens Core Growth fund -- which avoids companies involved in tobacco, alcohol, nuclear power and gambling, as well as those with poor records on workplace diversity -- has trailed the index by an average of three percentage points per year since its start in March 1995. If I were the portfolio manager, I'd pour myself a stiff one and head for the track.
One of the most famous SRI funds, Domini Social Equity, has lagged the market by a bit less than one percentage point per year since its 1991 inception. But some SRI funds do much better. Ave Maria Catholic Values Fund has beaten the S&P 500 by an average of five percentage points a year over the past five years. The fund, run by George Schwartz, shuns firms connected with abortion (some hospitals and insurers) and contraception, as well as those that contribute to Planned Parenthood.
So, philosophical and material values can merge. And this may be increasingly true. In the wake of An Inconvenient Truth and growing interest in alternative energy, so-called green funds may perform well for years. Imagine how solar-energy stocks would shine if it looked as if Al Gore had a shot at becoming president in 2008. For strictly mercenary reasons, it might be time to go green -- and I may do so.
Standing pat
But I plan to stick to my generally sordid ways, partly because I think the SRI view of corporations is grotesquely simplistic. I own shares of Apple and like its values -- but not when it comes to the backdating of stock options. I own Microsoft even though its co-founder is a monopolist who used disgusting tactics to stifle rivals. And many SRI funds own biotech giant Amgen, which is lobbying hard to persuade Congress to ban biotech generics, a move that would increase health-care costs. Amgen says the issue is safety. Perhaps, but I suspect that Amgen is every bit as greedy for profits as Altria and Lockheed Martin.
So if you take sides as an investor, that's fine. I'd really like to have scruples, too. I'm just not sure I can afford them.
Columnist Andrew Feinberg writes about the choices, challenges and frustrations facing individual investors.
-
Stocks Keep Climbing as Fed Meeting Nears: Stock Market TodayA stale inflation report and improving consumer sentiment did little to shift expectations for a rate cut next week.
-
Your End of Year Insurance Coverage Review ChecklistStop paying for insurance you don't need and close coverage gaps you didn't know about with this year-end insurance review.
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
What the Rich Know About Investing That You Don'tPeople like Warren Buffett become people like Warren Buffett by following basic rules and being disciplined. Here's how to accumulate real wealth.
-
How to Invest for Rising Data Integrity RiskAmid a broad assault on venerable institutions, President Trump has targeted agencies responsible for data critical to markets. How should investors respond?
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for Fall Rate Cuts by the FedThe probability the Fed cuts interest rates by 25 basis points in October is now greater than 90%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
