Conscience? Who Cares?
It's easy to be snide about so-called socially responsible investing. After all, it doesn't seem to make sense to screen out enormously profitable sectors of the investment world.
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.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-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.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Who Will Be the Beneficiaries of Your Wealth?
Deciding who you want to inherit your wealth, as well as when and how, is a crucial first step in estate planning. Here are the four beneficiaries to keep in mind.
By Adam Frank Published
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Stock Market Today: Stocks Tumble on Disappointing Big Tech Earnings
Poorly received quarterly results from Alphabet and Tesla sparked a steep selloff in equities.
By Dan Burrows Last updated
-
Stock Market Today: Mega-Cap Tech Rallies to Drag Markets Higher
Markets focused on upcoming earnings from Magnificent 7 stocks rather than chaos in D.C.
By Dan Burrows Published
-
Stock Market Today: Stocks Tumble After Spectacular Global Internet Crash
Market participants rushed out of risk assets to end a wild week of trading.
By Dan Burrows Published
-
Stock Market Today: Dow Sinks 533 Points as Big Banks, Mega Caps Slump
Goldman Sachs and Apple were two of the worst-performing blue chip stocks on Thursday.
By Karee Venema Published
-
Stock Market Today: Semis Get Slammed and Blue Chips Bounce
The potential for more curbs on tech sales to China set off a rotation into blue chips.
By Dan Burrows Published
-
Stock Market Today: Dow Spikes 742 Points After UnitedHealth Earnings
The S&P 500 and Nasdaq also scored wins Tuesday albeit with much smaller gains than the blue chip Dow.
By Karee Venema Published
-
Stock Market Today: Dow Adds 210 Points as Apple, Goldman Hit New Highs
A big rally in blue chips and some dovish Fed speak boosted the equities market Monday.
By Karee Venema Published
-
Stock Market Today: Markets Bounce Back on Rate-Cut Optimism
The latest readings on consumer sentiment and inflation helped lift the odds of the Fed easing in September.
By Dan Burrows Published