We’ve almost checked everything off our financial goals list for the year. Not bad, since we still have almost five months to go. We’ve maxxed out the HSA, and my husband’s IRA is on an automatic deposit schedule that will reach $5000 by December. We’ve paid off $5000 in our HELOC, which continues to be a priority. We’re now working on my Roth IRA. We’ve put $2000 into it so far, so we have another $3000 to go. The money we’ve contributed so far is just in a money market account. My plan is to get the entire $5000 into the account, and then pick one exchange traded fund to buy. I can buy ETFs for $10/trade (so one $10 charge for the whole $5000 investment), as opposed to $50 if I want to buy a mutual fund. I like the idea of buying one ETF each year. Over time, my portfolio would include several ETFs, which are automatically diversified much more than individual stocks.
So here’s the tough part. I want to invest my Roth in socially responsible funds. In particular I’d like to go with sustainable and alternative energy, organic farming, fair trade in developing nations, etc. But I’d also prefer that my retirement funds gain value as time goes by.
I’ve been looking at some exchange traded funds that are considered socially responsible, and I’m finding some tough choices. For example, I found PowerShares Wilder Hill Clean Energy Portfolio (PBW), which is primarily invested in alternative energy (solar, fuel cell, etc.) We love the idea of supporting alternative energy research and development. But Morningstar gives this ETF one little star, above average risk and low returns. On the other hand, the iShares KLD Select Social Index Fund (KLD) gets three stars, below average risk, and average return. But when you look at the top ten companies that KLD is invested in, it’s things like General Mills, H.J. Heinz, and Pepsi Co. It’s a socially responsible fund because they’re not investing in guns or alcohol or the Chinese government, but I’m not really that into the idea of supporting Pepsi. I don’t really want to send my money to big processed food companies that encourage conventional agriculture and junk food addictions.
I’m still working on this. I’m going to keep searching, trying to find my ideal ETF. Maybe it’s not even out there yet, although socially responsible investing has come a long way in the last ten years. In our day to day life, we’re very focused on minimizing our ecological footprint, avoiding toxic chemicals, eating organic food, and minimizing waste. So it doesn’t make sense to be blindly throwing money into the stock market, investing in big-name companies that aren’t concerned with any of the issues that we consider really important. I have a few months to get all this figured out, because our plan is to put $1000/month into my IRA for the next three months. So it will probably be December before I’m ready to buy an ETF. I’ll let you know what I find.
What about you? How do you balance your values with your need for investments that perform well? Are you willing to settle for lower returns in order to really customize your investments to precisely match your values, or would you prefer to deviate a little from your personal beliefs, and invest in companies that show good returns but don’t necessarily mesh with your values? Or do you just say to heck with it, and invest in whatever companies make the most money, regardless of how they do it?