The Virtues of Vice

The manager of the Vice fund explains why so-called sin stocks tend to be good defensive investments during economic downturns and discusses a few of his favorites.

Would you rather get rich or feel holy? That's how Charles Norton frames the dilemma of choosing between investing in the four sinful industries in his Vice fund (symbol VICEX), or putting your money in "socially responsible" businesses. Norton, portfolio manager of Vice, doesn't think you can have it both ways.

Socially screened stock funds -- also known as "socially responsible" funds -- have lagged the Standard Poor's 500-stock index, while shares of tobacco, alcohol, gaming and defense companies have topped the index over the past few years. For instance, the Domini Social Equity fund returned 11% annualized over the past three years, trailing the SP index by three percentage points a year. Over the same period, Vice fund gained an annualized 27%.

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Contributing Writer, Kiplinger's Personal Finance