Here's another:
http://www.bogleheads.org/forum/viewtop ... 0&t=119934
As per my post above: Actually, the Domini Social Index (KLD400 or DS 400), which supposedly tracks companies identified as "socially responsible", has outperformed the S+P 500, annualized since 1990. http://www.aabri.com/LV2010Manuscripts/LV10107.pdfabuss368 wrote: I am curious too if these funds have a higher cost than simply owning the market. Vanguard's Total Stock fund has an expense ratio of .05 presently.
Does FTSE SI hold Netflix? If so, no way will I invest in it. They were responsible for the closing of my favorite neighborhood video store, and they put my friend Bill out of a job. Now it's an Irish pub.nisiprius wrote:DARN! DefectiveByDesign wants me to "dump my Netflix stock" to protest Netflix's attempt to subvert Web standards in order to promote the use of DRM.
And here I am with my Total Stock... so, let's see, am I holding any Netflix stock within Total Stock? Yes. Does Vanguard FTSE Social Index hold any Netflix Stock? No. Probably not because of its social screening, but no. So, is it time to swap out my Total Stock for FTSE Social Index? Hmmm.... Naaahhhh...
I haven't looked into the KLD 400, or the two funds that stoub has graphed above, but I would guess that the reason they so closely track the S+P 500 is that they contain most of the same stocks, minus the most evil players, and that the most evil players are not a significant enough chunk of the entire index to widely skew results. I don't know if that is the case- I haven't looked that closely- but it would make sense. What is interesting is that, despite higher ER's, all of them still beat the broad index (by a slim margin). It does give me second thoughts about holding the broad index, if similar results can be achieved with a clearer conscience (not, apparently, an issue for the other posters here, but it is an issue for me). And yeah, I know...past performance does not guarantee anything....stoub wrote:I've owned SRI funds for some of my portfolio for nearly two decades. I'm under no illusion that continuing to do so is rational behavior, makes an impact on the world, or that the holdings of SRI funds are pure as snow (I have qualms with many of the holdings of most SRI index funds) but I don't see any compelling reason to switch away from the SRI funds I still own.
The idea of my money being associated with tobacco companies, oil companies, or weapons manufacturers simply feels icky to me. All things being equal, I'd prefer funds that tend to avoid these sectors, simply to avoid the icky feeling which I know is irrational.
There are indeed many SRI funds with high fees and I have invested in some of them in the past. But the two SRI funds I continue to hold are TIAA-CREF Social Choice Equity, Retail Class (TICRX) [ER: 0.49%], and the Pax MSCI EAFE ESG Index ETF (EAPS) [ER: 0.55%]. The expense ratios are certainly higher than the non-SRI equivalents, say Vanguard Total Stock Market Index Fund, Admiral Shares (VTSAX) [ER: 0.05%] and Vanguard Tax-Managed International Fund Admiral Shares (VTMGX) [ER: 0.10%], but in looking at the Morningstar growth charts since inception, which are net of fees, I don't see much of a difference.
Past performance is no guarantee. And if either of these underperforms the Vanguard non-SRI equivalent fund in a meaningful way, I suspect I may wobble. But for now, for me, I don't see the harm in continuing to hold these.
So we've gone from them being Socially Iresponsible to being EVIL ?protagonist wrote:...minus the most evil players, and that the most evil players....
Leo Tolstoy, War and Peace wrote:“It's not given to people to judge what's right or wrong. People have eternally been mistaken and will be mistaken, and in nothing more than in what they consider right and wrong.”
Another one:JoMoney wrote:So we've gone from them being Socially Iresponsible to being EVIL ?protagonist wrote:...minus the most evil players, and that the most evil players....
The judgment just gets worse and worse.
Leo Tolstoy, War and Peace wrote:“It's not given to people to judge what's right or wrong. People have eternally been mistaken and will be mistaken, and in nothing more than in what they consider right and wrong.”
Moral certainty is always a sign of cultural inferiority. The more uncivilized the man, the surer he is that he knows precisely what is right and what is wrong. -- H.L. Mencken
Oh, my!bertilak wrote:Another one:JoMoney wrote:So we've gone from them being Socially Iresponsible to being EVIL ?protagonist wrote:...minus the most evil players, and that the most evil players....
The judgment just gets worse and worse.
Leo Tolstoy, War and Peace wrote:“It's not given to people to judge what's right or wrong. People have eternally been mistaken and will be mistaken, and in nothing more than in what they consider right and wrong.”
Moral certainty is always a sign of cultural inferiority. The more uncivilized the man, the surer he is that he knows precisely what is right and what is wrong. -- H.L. Mencken
To quote one of our more famous leaders: "But that would be wrong!"umfundi wrote:Seriously, this thread has convinced me that I should diversify and expand my moral constraints.
You're killing me!bertilak wrote:To quote one of our more famous leaders: "But that would be wrong!"umfundi wrote:Seriously, this thread has convinced me that I should diversify and expand my moral constraints.
You are missing three points...JoMoney wrote:So we've gone from them being Socially Iresponsible to being EVIL ?protagonist wrote:...minus the most evil players, and that the most evil players....
The judgment just gets worse and worse.
Leo Tolstoy, War and Peace wrote:“It's not given to people to judge what's right or wrong. People have eternally been mistaken and will be mistaken, and in nothing more than in what they consider right and wrong.”
Now this one I like, and I wholly agree with. I never suggested I know precisely what is right and wrong. Evidence of that is that I am questioning the morality of my investment strategy. Questioning your own morality, or any of your beliefs, I always thought was a good thing. To live a moral life, I have to make decisions, based on what I believe is right or wrong, rightly or wrongly, and I have to constantly re-evaluate my beliefs. I think Mencken would probably agree with me on that as well. We'd get along, I am sure. After all, Mencken also said ; "God is a comedian, playing to an audience who is afraid to laugh".Moral certainty is always a sign of cultural inferiority. The more uncivilized the man, the surer he is that he knows precisely what is right and what is wrong. -- H.L. Mencken
Hmmm. As a (former) insider in this sector, that "icky feeling" leads to interesting investment desires, and interesting PR + public policy and/or political pandering.stoub wrote:The idea of my money being associated with ... oil companies simply feels icky to me. All things being equal, I'd prefer funds that tend to avoid these sectors, simply to avoid the icky feeling which I know is irrational.
+++1 Weak governance is definitely an area for improvement!protagonist wrote:Brilliantly expressed.
Thank you, nisiprius!!
This presumes there is a unidimensional scale from less to more "responsible." The problem is that given a set of companies people would not agree on how responsible they might be.Even when the fund does not agree perfectly with all one's values, it could still be seen as better than other funds that don't try to be socially responsible. An individual just cannot assess every company's practices and so it's reasonable to invest in a fund that vets those companies for you.
Yes, but that simply says "they buy the stocks they buy, and not those that they do not". To have confidence that a particular fund invests according to an individual's beliefs, that individual would need to know much more about how the fund makes these decisions. How far from, or close to, certain industries does the fund get? How does it resolve the problems caused by the highly integrated nature of our economy?Managers of the SRI fund decide whether or not to buy X based on their stated fund values & the values of the market they are targeting.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence.
(Related to Berkshire's ownership of PetroChina stock and shareholder resolution to sell http://www.bloomberg.com/apps/news?pid= ... QL8OlRK6lM )Warren Buffett wrote:It’s impossible to grade marketable securities on moral activity. Berkshire Hathaway has and will buy what trades, but will not buy companies that engage in certain behaviors. PetroChina owns 40% of the oil in the Sudan that is government owned. If they did not own it, someone else would. Also, you have to keep in mind, if PetroChina did not buy it its possible the Sudanese would own 100% of the oil rights and that’s not so good either.
I find it funny that people find time to protest PetroChina for ownership of the Sudanese oil, but with the $300 billion or so of imported goods from China, these same people don’t protest Chinese goods. They protest investment in Chinese companies though.
Many here are using the argument that if our reasoning is not perfect, and if we risk making mistakes, we are incapable of making decisions. Following that logic, none of us should, for example, vote for a candidate in an election, because we might be making the wrong choice. The whole idea is simple. If you are opposed to the idea of supporting cigarette manufacture, you don't invest in it. How far you take that depends on your own conscience- I do know people who will not shop in convenience stores that sell cigarettes and lottery tickets, and I respect their moral decision. I don't know what the outcome of their decisions will be, but they are trying to make a better world, and that is commendable. One who invests in the Domini index reviews what is contained in that index, and what is not, and makes their decision to the best of their conscience, realizing that things are more complex than black and white and nothing is perfect. Just as we do when we vote for a candidate who may or may not live up to our expectations. Simple.JoMoney wrote:
So how far do you take it? if you won't own cigarette companies, will you own retailers that sell cigarette's? If you won't own the retailers will you own the shipping companies that do their distribution? What if a completely unrelated company owns bonds/commercial paper of one of these companies?
How exactly does Mr. Smith know that this is true? Where is the hard data that shows that people do not factor their self-opinions, their wish to see themselves as moral people, into their economic behavior? Not at all? Not even a little bit? Perhaps they are very wicked people for allowing their actions to be shaped in such a evil way, but, don't they ever do it?wshang wrote:It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.
The quote is slightly out of context. Here is a bit more context:nisiprius wrote:How exactly does Mr. Smith know that this is true? Where is the hard data that shows that people do not factor their self-opinions, their wish to see themselves as moral people, into their economic behavior? Not at all? Not even a little bit? Perhaps they are very wicked people for allowing their actions to be shaped in such a evil way, but, don't they ever do it?wshang wrote:It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.
I underlined some things I think give the quote a different flavor than the truncated version. Note especially the "only" near the beginning and the "chiefly" near the end. The wider quote is less absolutist than the truncated version.[M]an has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.
This made me realize - Target doesn't sell cigarettes! Or ammunition & guns. I gripe about Target at times but this raises it a few notches in how I regard it. Of course, it sells alcohol in states where it can -some might see this as bad, and all of its chocolate comes from sources using (child) slave labor. Many of its products are probably made in foreign factories without great track records for worker treatment (I know they say they monitor it but the recent factory tragedy in Bangladesh shows how imperfect those claims are - Walmart labels were found in that factory).JoMoney wrote:So how far do you take it? if you won't own cigarette companies, will you own retailers that sell cigarette's? If you won't own the retailers will you own the shipping companies that do their distribution? What if a completely unrelated company owns bonds/commercial paper of one of these companies?
tetractys wrote:Many of the biggest fund managers and pension funds have divested from PetroChina because of it's well known funding of Sudan genocide and questionable investments in Myanmar and Iran. Vanguard is still holding despite several years now of steadily increasing investor pressure. It appears that where there's a clear moral line, SRI can make an impact. -- Tet
http://www.domini.comprotagonist wrote:Plus, if you believe the charts and statistics above, it is profitable.....the Domini index has consistently beat the S+P since 1990 (that's quite a long stretch of outperformance- can the same be said of any sector?) , and its related ETF has been beating the S+P despite an ER of .50%. If those results are consistent I can conceive of a few possible reasons:
1. The Domini would normally track the S+P quite closely because those stocks that are not included in the index do not make up a big enough percentage of the index to significantly skew results, and
2. Those stocks that are not included may incur problems, expensive legal defenses, whatever..... that drag their performance (or perhaps it is just coincidence).
I think one can very simply make an excellent ethical and financial argument for SRI- contrary to what I might have thought they do not seem to be in conflict with each other - and I don't understand the degree of opposition and vitriol in this thread (other than feeling like the sacred cow of broad market investing is being attacked). Certainly, a high degree of diversity is still maintained- the only valid argument against SRI that I can see is the higher ERs, though performance does not seem to suffer historically. As a result of this thread I am considering switching in my tax-advantaged account.
The evolution of the "Domini Index" and funds in which it is used isn't immediately obvious. This article explains how the index created by Amy Domini and her partners at KLD in 1990 as the "Domini 400 Social Index" is now the "MSCI KLD 400 Social Index" [factsheet, methodology], which is currently licensed by BlackRock for use in the iShares MSCI KLD 400 Social ETF (ticker symbol DSI, which has a 0.50% expense ratio; this is the fund protagonist mentioned upthread). As lindisfarne points out, the "Domini Index" hasn't been licensed to Domini Social Investments LLC for any of their funds since 2006.lindisfarne wrote:http://www.domini.comprotagonist wrote:Plus, if you believe the charts and statistics above, it is profitable.....the Domini index has consistently beat the S+P since 1990 (that's quite a long stretch of outperformance- can the same be said of any sector?) , and its related ETF has been beating the S+P despite an ER of .50%.
has Domini social equity fund listed at a 1.25% expense ratio. It's not clear what the expense ratio will be after Nov. 30, 2013 ("1. Until November 30, 2013, Domini Social Investments LLC has contractually agreed to waive certain fees and/or reimburse certain expenses, including management fees, so that the Fund's expenses will not exceed, on a per annum basis, 1.25% of the daily net assets representing Investor shares, absent an earlier modification by the Fund’s Board of Trustees.")
According to Morningstar charts, VTSAX for the last 10 far outperformed it. If you look at the performance tab for DSEFXyears, it performed roughly on par with the S&P 500 TR from 2008-current, except in 2009 it did quite a bit better.
Up until Nov 30, 2006, it was an index fund; at that point, it switched to active management.
lindisfarne wrote:protagonist wrote:Plus, if you believe the charts and statistics above, it is profitable.....the Domini index has consistently beat the S+P since 1990 (that's quite a long stretch of outperformance- can the same be said of any sector?) , and its related ETF has been beating the S+P despite an ER of .50%. If those results are consistent I can conceive of a few possible reasons:
1. The Domini would normally track the S+P quite closely because those stocks that are not included in the index do not make up a big enough percentage of the index to significantly skew results, and
2. Those stocks that are not included may incur problems, expensive legal defenses, whatever..... that drag their performance (or perhaps it is just coincidence).
I think one can very simply make an excellent ethical and financial argument for SRI- contrary to what I might have thought they do not seem to be in conflict with each other - and I don't understand the degree of opposition and vitriol in this thread (other than feeling like the sacred cow of broad market investing is being attacked). Certainly, a high degree of diversity is still maintained- the only valid argument against SRI that I can see is the higher ERs, though performance does not seem to suffer historically. As a result of this thread I am considering switching in my tax-advantaged account.
Yes, but if this is accurate, the ETF (DSI) has a 0.50% ER: http://finance.yahoo.com/q/pr?s=DSI+Profile I was considering DSI as an investment (as stoub referenced above), not DSEFX.http://www.domini.com
has Domini social equity fund listed at a 1.25% expense ratio. It's not clear what the expense ratio will be after Nov. 30, 2013 ("1. Until November 30, 2013, Domini Social Investments LLC has contractually agreed to waive certain fees and/or reimburse certain expenses, including management fees, so that the Fund's expenses will not exceed, on a per annum basis, 1.25% of the daily net assets representing Investor shares, absent an earlier modification by the Fund’s Board of Trustees.")
I was not considering DSEFX. I was considering DSI (NYSE). The performance graph I referenced above showed DSI outperforming the S+P. I cannot vouch for its accuracy, nor did I compare it to VTSAX, though such a comparison would be valid. stoub provides one above, dating from 2006.According to Morningstar charts, VTSAX for the last 10 far outperformed it. If you look at the performance tab for DSEFXyears, it performed roughly on par with the S&P 500 TR from 2008-current, except in 2009 it did quite a bit better.
I believe DSI is still passive and tracks the index- at least that is what I recall reading.Up until Nov 30, 2006, it was an index fund; at that point, it switched to active management.
I would be concerned about that as well. But one cannot damn all social investing because of the behavior of Working Assets.lindisfarne wrote: I'm not saying Working Assets donations didn't do *some* good - but the private owners also made an obscene amount of money (that was not donated to "good causes") off of their customers. In a way, it is a brilliant marketing technique. They say "to date we've raised 75 million" - but the owners have pocketed far more than that.
Again, I was talking about DSI (ER=.50%), not the mutual fund. Of course they are somewhat "wishy-washy", and imperfect- there is no universal ethos that everybody can agree upon, and I am sure it would be easy for anybody to find fault with many of their "ethical decisions". Just as I am sure we all have issues with the political candidate's decisions of our choice after he/she takes office (regardless of whether you vote republican or democrat). But if the social investors eliminate even one company that you consider ethically reprehensible from your portfolio, and you are roughly breaking even in terms of performance, that should be an improvement. And of course they are in business to make a profit, as are John Bogle and most businessmen/women....that is not to say that they do not have other motivations or that they are, by definition, unethical or that they do not want to do good for their investors, society, or both.While SRIs do have to account to the SEC (whereas Working Assets had to account to almost no one), and while Domini's 1.25% ER is not as high as some, I personally find Domini's "investment criteria" pretty wishy-washy. They may be more transparent than Working Assets, but I question how "socially responsible" their criteria really are. But, it's all a matter of semantics. Their criteria are not "socially responsible" enough to even tempt me, though.
Right. And I am not suggesting that you or I change our strategy. I do think that it is valid food for critical thought, and that it is worth re-evaluating our sacred cows from an ethical perspective, or any other perspective for that matter. I don't think it is an empty issue. or that ethics should be separated from making money or anything else you do in life. But that's me.As for Vanguard's holdings: if you hold an index fund, that's what you choose to hold. I guess holders of the mutual fund can try to influence those holding a bit (the index fund does not have to hold every company that's in the index) and call on Vanguard to avoid some company. But that's not really the nature of index investing.
To what end? You feel better?But if the social investors eliminate even one company that you consider ethically reprehensible from your portfolio, and you are roughly breaking even in terms of performance, that should be an improvement.
The trade association for the U.S. SRI industry publishes a report called The Impact of Sustainable and Responsible Investing; Chapter 2 covers the impact on companies by activist and SRI shareholders.umfundi wrote:Is there any evidence that SRI is a factor that affects companies' behaviors? (I have no idea, I am just asking.)
Yes, Keith, partially. [OT comment removed by admin LadyGeek]umfundi wrote:To what end? You feel better?But if the social investors eliminate even one company that you consider ethically reprehensible from your portfolio, and you are roughly breaking even in terms of performance, that should be an improvement.
IKeith
Companies like TIAA-CREF, American Funds, and T. Rowe Price, all of which I believe are custodians of large index funds, have divested in certain condemned companies. Whether or not that's against the nature of index investing is a matter of opinion. A case in point might be: The S&P 500 invests by committee, does it not? Then by extension, a group of investors of an index fund might be considered a committee, and their decision to exclude company-X-unwanted from the index would hold.lindisfarne wrote:... As for Vanguard's holdings: if you hold an index fund, that's what you choose to hold. I guess holders of the mutual fund can try to influence those holding a bit (the index fund does not have to hold every company that's in the index) and call on Vanguard to avoid some company. But that's not really the nature of index investing.
^Right-on. Look, OP, I know it's depressing coming on here and having everyone shoot down SRI. Sorry. That was me too. Eventually, I concluded that SRI was mostly akin to straining out a gnat and swallowing a camel, as one guy put it long ago. There are many, many things that you should spend your creative energies (and $) on that can make the world a better place. Having the "right" funds in your port mostly only helps you feel puritanical. Better to actually be holy than just feel holy.z3r0c00l wrote:This is one of the many little, easy things that someone can do to feel better, but not really accomplish any good in the World.
Really giving back looks an awful lot like donating tons of time and working very hard to help others, say weekends at a soup kitchen, or volunteering to tutor children in the inner city. Want to help the environment? Stop eating meat, move to a city, sell the car, don't own any pets, and don't have any biological children. If the little things, like recycling or investing in a social fund, keep you from really putting in the effort to do something important, then they cause more harm than good.
When it comes to investing, stick to the purpose of investing; to make money.