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.

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Andrew Feinberg
Contributing Columnist, Kiplinger's Personal Finance
Feinberg manages a New York City-based hedge fund called CJA Partners.