Make Money in Socially Responsible Companies -- the Easy Way
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you want to invest in socially responsible companies without spending gobs of time researching the universe of stocks in order to find them, the iShares KLD 400 Social Index ETF (NYS: DSI) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.50%. The fund is fairly small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF's performance has been roughly in line with the S&P, underperforming it by a smidge over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 10%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Plenty of socially responsible companies had strong performances over the past year. Intel (NAS: INTC) , a technology powerhouse posting double-digit growth rates for revenue and earnings and also offering a hefty 3% dividend yield, gained 42%. It's offering a suite of "Ultrabooks" and is even looking to get into Internet TV. Qualcomm (NAS: QCOM) , meanwhile, gained 28%, "ruling the technology" in 3G and 4G transmissions and also moving into home connectivity and processor technologies. Its Snapdragon chips are found in most Android devices and it has a major presence in Apple offerings, as well. Still, some worry about competition from NVIDIA.
United Parcel Service (NYS: UPS) also advanced, gaining 16% as our economy finally starts getting back on its feet and sending more packages on their way. The company also stands to benefit from the U.S. Postal Service's troubles, as shuttered post offices will send more business to UPS. It's also expanding abroad, recently buying a Dutch delivery company with operations across Europe.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. 3M (NYS: MMM) shed 1%, though its revenue growth has been accelerating in recent years. It offers investors a lot of diversification, as it's involved in businesses such as Post-it notes, digital billboards, e-readers, adhesives, abrasives, and surgical supplies -- among many other things. It even offers a 2.7% dividend.
The big picture
Socially responsible investing is actually a profitable way to build wealth. If this has piqued your interest, you might look into these other ETFs. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
At the time this article was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, owns shares of Apple, 3M, Qualcomm, and Intel, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Qualcomm, Intel, and Apple.Motley Fool newsletter serviceshave recommended buying shares of Intel, Apple, NVIDIA, and 3M, as well as creating a diagonal call position in 3M, writing puts on NVIDIA, and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.