Thoughts On Socially Responsible Investing….

Good question here from the Ask Cullen page which I thought was worth highlighting:

“Is it really ever possible? I’m interested in Cullen’s or anyone’s views on this.

Investors like the idea of SRI, but I look at so called SRI funds and see things in the top ten holdings such as Herbalife (MLMs – exploitative?),  energy companies, gold etc. I know that no company can ever tick every box for social responsibility but sometimes I wonder if SRI funds that hold things like Wal-Mart just kind of make a mockery of the whole thing. I’m interested in other people’s thoughts on this.”

My response:

“I don’t think there’s really any point. You won’t find SRI funds that outperform the market over long periods of time. So most of the mutual funds that do it don’t beat the market or have higher fees. And the socially responsible KLD index fund is a closet S&P 500 fund that charges you 0.5%. There’s just no point owning something like that.

If you want to do good with your money then give to charity. You could just buy the VV (Vanguard Large Cap fund), save the 0.4% on fees and give it away. But don’t donate it to a fund manager via higher fees just because it makes you feel like you’re being “socially responsible”. Unless you think it’s your social responsibility to give money to Wall Street!”

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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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