Socially Responsible ETF
Being Socially Responsible while investing in stocks gives you a good
feeling and it may matter a lot to you if you are averse to industries
such as tobacco, defense and energy.
However, the reality is that if you take those industries out of your
portfolio, your investment may suffer from high risk of less
diversification. Also, recently these funds lagged the market because
they are usually underweight in the energy sector, which has posted
strong gains with oil prices rising dramatically. Also, these funds never
utilized the tobacco company Altria's (MO) recent gain and regular
dividend.
But money may not be everything in investment and some people
argue that socially responsible companies, by their nature, are usually
solid investments and in long term they really pay off. Two of the
respected index funds in this area are: Vanguard Calvert Social Index
Fund (VCSIX) and the TIAA-CREF Social Choice (TCSCX).
In late January, Barclays Global Investors launched the iShares
Select Social Index Fund KLD , the first socially responsible ETF. As a
comparison, KLD's expense ratio is 0.50 percent of assets, while both
these Mutual funds have fees of 0.25 percent and 0.27 percent. Also,
unlike no-load mutual funds, ETF investors must pay broker
commissions to buy and sell shares. This is somewhat disadvantageous
if you plan to dollar-cost average.
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