Ethical investing through ETFs

[extremis]

I was about to invest in S&P 500 when i noticed that a company notorious for GMO products is included. I have already read the discussion on other ethical investing threads and i understand that buying stocks from other investors on secondary market does not help the 'unethical' company in any way, but still i do not feel comfortable holding a share of a company i despise. I am looking for accumulating SRI ETFs domiciled in EU (for tax purposes); i have found this one:

iShares MSCI USA SRI UCITS ETF

It is a rather new ETF with only 20M funds. Do you think this would give returns comparable to S&P 500? Is the low volume a problem (what if i want to sell my shares and no one is buying)? Also, it is offered in different currencies (EUR, USD, GBX) at different exchanges, is there any difference if i choose one over the others? My currency is Euro.

If you know any better alternatives i would love to hear.


Thanks for any suggestions!

[maizefolk]

Do you think this would give returns comparable to S&P 500?

The articles I've read suggest that "socially responsible" index funds tend to return about 2% less per year than the overall indexes they are selected from. For a while there was even "sin" index floating around that invested only in companies people might feel bad about owning (cigarette companies, gun manufacturers, companies that owned casinos, etc) on the theory that because so many people avoided buying these companies stock, the companies would tend to be under valued and provide a higher return.



Red is VTI (total US stock market), blue is the only "vice" index I could find at the moment, and yellow is a vanguard social fund that is supposed to track only companies with strong Environmental and social practices. Vice really didn't do any better than the overall stock market, but ethical definitely did worse than either.

That said, if your personal ethical beliefs* prohibit you from investing in the overall stock market, there are worse things in the world than earning a subpar annual return on investment. Alternatively, you could buy the whole stock market index but plan to donate the extra 2% per year you earn from owning companies you disagree with to charitable or political action organizations doing things you do agree with.

*I strongly disagree with your views on the ethics of GMOs, but that's not the purpose of this thread.

[nereo]

If you know any better alternatives i would love to hear.

If your opinions run so strongly about one company that you are uncomfortable investing in the SP500 you probably will be best served by choosing individual companies that you are comfortable investing in and creating your own portfolio.

It's not as difficult as it sounds - this is what investors before Vanguard first offered an SP500 index.

With sufficient diversity you'll likely be close to the broader market over time, with an about even probability of being slightly under or over.

WHile there are literally dozens of "ethical ETFs" out there, I've found most people who feel this strongly won't agree with the ETF's definition of what constitutes "ethical".  For example, Apple is used in many because of their commitment to renewable energies to power their servers, but they sub-contract to Foxconn.  What about a company that has fair-labor practices but donates money to parties or organizations you are against?  Such is the rabbit-hole...

[cincystache]

You could use motifinvesting.com

This allows you to pick a basket of up to 30 stocks and/or ETFs and charges $10 per trade. Not bad if you invest in large chunks and gives you the opportunity to buy companies you're okay with. I don't personally use this company, (I use primarily broad index funds) but it seems like a decent option to get enough diversification without huge commissions.

[extremis]

Thank you all for the suggestions!

Unfortunately motifinvesting.com does not accept customers outside the US. I know handpicking stocks is the way to go, but i don't have the skills and time to do it. Since this is my first buy, i think i would rather go with an ETF that is well diversified and (relatively) cost efficient. I don't mind if i get slightly lower returns than market average (however, 2% lower returns is too much, let's hope SRI ETFs will close the gap with time).

So, i guess i will start my investing journey with this ETF. I have found it in XET (EUR), SWX (USD) and LSE (USD, GBX) exchanges, what should i choose? Also, it seems the price is high right now, should i wait until it goes down or buy some shares immediately? I have read a lot about the pros and cons of trying to time the market, but i am not sure what is the best strategy to follow. I have decided to keep my shares for a long time though (even in the case of a bearish market).

[nereo]

Thank you all for the suggestions!

Unfortunately motifinvesting.com does not accept customers outside the US. I know handpicking stocks is the way to go, but i don't have the skills and time to do it. Since this is my first buy, i think i would rather go with an ETF that is well diversified and (relatively) cost efficient. I don't mind if i get slightly lower returns than market average (however, 2% lower returns is too much, let's hope SRI ETFs will close the gap with time).

So, i guess i will start my investing journey with this ETF. I have found it in XET (EUR), SWX (USD) and LSE (USD, GBX) exchanges, what should i choose? Also, it seems the price is high right now, should i wait until it goes down or buy some shares immediately? I have read a lot about the pros and cons of trying to time the market, but i am not sure what is the best strategy to follow. I have decided to keep my shares for a long time though (even in the case of a bearish market).

If you've read the "pros and cons of trying to time the market" and acknowledge that you do not have the skills or time to look deeply into stocks, I cannot see how you would reach any other conclusion than: Market Timing is definitely not for you. Invest your money as soon as you are able, as often as you are able and don't try to pull in/out based on market fluctuations.

Regarding which exchange to use - that's largely irrelevant as it will go up or down equally across all exchanges.  Choose the one that's easiest for you to invest in based on where you are and what currency you are being paid in.