Transcripts

"Of Mutual Interest"-John Waggoner, Mutual Fund Columnist at "USA Today"

SUSIE GHARIB: In tonight's "Of Mutual Interest," the ups and downs of socially conscious mutual funds. Here's John Waggoner, mutual fund columnist at "U.S.A. Today."

JOHN WAGGONER, MUTUAL FUND COLUMNIST, USA TODAY: If you own a fund that screens its investments for their social merits as well as their investment merits, you may be feeling a warm glow of goodness. But you're probably not feeling a lot wealthier. If you're willing to take more risk, you might find some funds that make you feel good and rich. If not, you'll just have to be patient. A few funds try to avoid investing in companies that shareholders might find objectionable: polluters, for example, or producers of alcohol, tobacco or firearms. The funds' screening criteria depend on their target investor. The vice fund, for example, invests in everything that's bad for you. The MMA Praxis fund invests in companies in accordance with Mennonite principles. But many socially conscious funds have been laggards recently. The Vanguard FTSE social index fund for example, has lagged 91 percent of large company stock funds the past five years. The main reason -- stocks of energy and mining companies have been the big winners in the stock market and many of these funds have minimal investments in them. It's hard to find a big oil company that doesn't pollute. But you can find funds with significant stakes in alternative energy. Typically, however, these are funds that are invested in the stocks of smaller companies, which are inherently riskier than large company stocks. And while alternative energy stocks aren't the next new Internet companies, they often have little in the way of earnings, which analysts agree is generally a nice thing to have. Or you can have a bit of patience. Sooner or later, the market will turn its attention to something else and your socially responsible funds should fare well. And for many people, the thought of having your money do some good in this world is worth the wait. I'm John Waggoner