"Of Mutual Interest"- Jason Zweig, Investing Columnist, "Money Magazine"
Tuesday, May 22, 2007PAUL KANGAS: In our "Of Mutual Interest" segment tonight, there's a lot of talk these days about global warming and the environment. So should you be investing in a green mutual fund? Joining me tonight, Jason Zweig, investing columnist for "Money" magazine. Jason, welcome back. Good to see you.
JASON ZWEIG, INVESTING COLUMNIST, MONEY MAGAZINE: Thanks, Paul.
KANGAS: Jason, what's your view of environmentally friendly funds?
ZWEIG: Well, Paul, the real question here I think on peoples' minds is whether global warming can heat up your portfolio. And I'm not so sure the answer is as simple as a lot of people would like us to believe. You know, if global warming is the problem that most scientists agree it is, what we're likely to see is a multi-trillion dollar industry that really kind of spreads its tentacles throughout the whole economy. And I'm dubious that a sector fund is going to be the right way to play that.
KANGAS: So they wouldn't necessarily pick the issues that are going to take the lion's share of the profits in such an endeavor?
ZWEIG: Exactly. I mean at this stage, there aren't that many companies, established companies that are already.
KANGAS: And why not? It's such a hot topic in the news. You'd think there'd be a lot more funds like this. Why not?
ZWEIG: Well, I think one of the reasons, Paul, is because there are a lot of established industrial giants that are already active in this area like General Electric, for example and any number of companies in Europe and Japan.
KANGAS: Well one fund that has been around for a while like this, as a matter of fact, it's been around since 1982 is called the new alternatives funds which invest in alternative energy sources, but it's relatively small with assets of only about $180 million. We have a chart that shows over the last 10 years of performance it's really been a roller coaster. What role could a fund like that play in an investors' portfolio?
ZWEIG: Well, Paul, the problem here is the same problem that you get into almost any time you invest in a sector fund which is that when the returns are good, they tend to be very good. And when they're poor, they tend to be quite poor. And the good periods are often dwarfed by the periods of poor performance. They come in streaks, and streaks tend to be short.
KANGAS: We just have a minute left but the fees for funds like these tend to be on the steep side and new alternative, for example, has a front end sales load and expenses of 1.25 percent annually. Don't those types of fees eat up the returns pretty quickly?
ZWEIG: They definitely do, Paul. My belief is that if you want to play globally warming planet and you want to play the green revolution, then probably the best way to do it is in your own life by sort of cleaning up your own act and investing in a diversified fund instead of a narrowly focused fund. I don't really think that you're going to be able to clean up on the environment by buying an environmentally friendly fund.
KANGAS: So if you had a green thumb yourself, you would give it a thumb's down apparently, with this type of fund?
ZWEIG: I would cultivate my own garden first.
KANGAS: OK.
ZWEIG: That's the right way to put it.
KANGAS: Once again Jason, I want to thank you for your insight and observation.
ZWEIG: Thanks, Paul, a pleasure.
KANGAS: My guest, Jason Zweig, investing columnist for "Money" magazine.
