A reader asked me yesterday about our investing strategy, as I had mentioned a couple years ago that I was buying a socially responsible ETF (a clean energy fund). Turns out, that purchase wasn’t my best choice ever. My timing could have been better… I bought it in September 2008, and we all know what happened to the market later that fall. My $5000 dropped to $2500 almost overnight. But nearly everything tanked, so I wasn’t particularly concerned about my clean energy fund, any more than the rest of our portfolio. But by December 2009, my clean energy fund was still worth just about $2500. The rest of the market had been rebounding for about nine months at that point, and my fund hadn’t shown any signs of bouncing back. So we sold it. Good thing we did, because the fund still hasn’t recovered, and my money would still be worth about $2500.
We have several retirement accounts. Roths, traditional IRAs, SEPs through our business, and our HSA (which we consider a retirement account, although it has the added bonus of being able to be used to pay for medical expenses at any time in our lives, and the money will always be tax free if we need it for medical expenses. Otherwise, it works like a traditional IRA – tax deductible when we contribute, taxed when we withdraw). We are somewhat heavily tilted towards mid-cap funds (here’s a good Boglehead thread about the advantages of mid-caps). We only own one individual stock (Vodafone). Everything else is in very low-cost index funds (including bond funds) and REITs. We have our SEPs with Vanguard (and we also have an emergency fund with Vanguard, made up of municipal bonds. Even though it’s a taxable account, we don’t really pay any taxes on it, since muni bonds are tax exempt) so we’re able to take advantage of Vanguard’s very low cost funds. My husband has an IRA with Fidelity, and we put all of our purchases on our Fidelity AmEx card to get the 2% rewards deposited into his IRA. We also both still have our IRAs with Ameritrade.
Our HSA is invested through Saturna in Amana’s growth fund (AMAGX). When we first started putting our money there, we did so because it had good returns, no contribution/withdrawal/use fees, and seemed like a user-friendly HSA. It was later that we discovered that AMAGX operates according to Muslim investing rules, and does not invest in alcohol, pornography, casinos, or non-Islamic banks. Technically it’s considered a socially responsible fund, although it’s not really what I think of when I think about social responsibility.
Vanguard has a socially responsible index fund (VFTXS), but it just doesn’t perform as well as the market as a whole. Basically, the conclusion we’ve come to is that we want our retirement investments to perform as well as possible – period. That said, we don’t own any shares in Monsanto or tobacco companies, because they aren’t included in AMAGX, and that’s the only large-cap fund we own. Since we invest primarily in mid-cap funds, we tend to avoid the worst offenders, since those are usually big companies with more clout.