Author Topic: Just changed investments, or, am I going to go to hell?  (Read 1629 times)

WootWoot

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Just changed investments, or, am I going to go to hell?
« on: December 11, 2017, 04:09:33 PM »
After having discovered that my 403(b) through TIAA-CREF offers several Vanguard options, I decided to take $10700. of my money and put it in VFIAX.

Most of the $80,000 I have with CREF is in their Social Choice fund, because I feel strongly about not investing in stuff like tobacco and firearms. But I'm slowly learning about investing, and I also am trying to make up for lost time. I'm 53 years old and I did not start a retirement fund until I was in my mid to late 30s. There were years when I was unemployed and contributed nothing. There were years when I lost my job and had to roll over into a crappy 401(K) with a bank that paid almost nothing. There were years (right after I started the job I now have) when I felt I could not spare a penny and didn't contribute.

I wonder if any of you stick to Social Choice solely, how you feel about it, etc. I was really scared just to make the decision to change anything on my CREF account. I've been a super conservative investor, mostly b/c I don't really know much about it. I'm just learning now.

Just sitting here wondering if I'm now backing some horrible company that firebombs babies or something...

MrsWolfeRN

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Re: Just changed investments, or, am I going to go to hell?
« Reply #1 on: December 11, 2017, 04:39:45 PM »
I believe JL Collins had an article about this recently. He says there are two problems with socially conscious investing: high fees, and the dilemma about who decides what is socially conscious. For example alcohol is ok for some people but not others. He says to invest in a regular low fee index fund, then donate the difference in expense and performance to a charity of your choice.

WootWoot

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Re: Just changed investments, or, am I going to go to hell?
« Reply #2 on: December 11, 2017, 04:51:45 PM »
I'm on his blog right now, trying to find it. Lots of articles there. Any idea how i might find it more easily?

That is a good thought--choosing your charities.

nexus

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Re: Just changed investments, or, am I going to go to hell?
« Reply #3 on: December 11, 2017, 05:14:10 PM »
Posting to follow. I think MMM posted something about this, particularly about someone who did not want to invest in a good index fund because one of the companies was firearms or tobacco related...maybe? I forget. I think the comparison he made revealed that choosing the investment w/o the 'bad' company ended up costing you thousands and thousands of dollars in the long run. There simply wasn't a big enough market of folks with values like yours to warrant an investment company making an 'ethical' index fund that had comparable returns as the mainstream one, for lack of better words. Anyone, keep me honest here! I can't find the article. Maybe it was MadFientist? (Oh, THANK YOU FOR FINDING IT! JLCollins)

Yours is the Admiral Shares S&P 500 Index Fund, which may have a company or two your beliefs don't jive with? (not sure, I'm not going to look through a list of 500 companies :p ) ...but if it is the best, most efficient investment choice, is choosing something else really worth the loss of gains?

When you own 500 shares split between $10k, do you really think the fraction that goes to that company ( 1/500th, for simplicity or $20) really benefits them, assuming everything is weighed equally? (It isn't. Bigger companies get a better % of your dollars). Even at $100k, it's only $200. $1MM, $2k. I'd wager your other $998,000 is doing more good for the world than that $2k is doing harm, right? There are many folks that could retire on less than a million bucks on these forums (myself included), so maybe having 1/500th or 2/500ths of your money invested in something you don't agree with is worth the efficiency and simplicity vs. foregoing gains? At the end of the day it's your survival and your retirement. I respect that.

1/500 is 0.20%, 2/500 = 0.40%. Even if there were 5 companies, that's only 1%. I'm cool being 1% evil at the end of the day. That's pretty conservative. :)

Maybe this is weird, but when I invest in VTSAX I don't think of it as investing in individual companies, but investing in a product/theme that Vanguard created. As long as Vanguard is good, honest, and respectable I'm a happy customer. I simply don't expend any time/energy/thought into the nitty gritty. With VTSAX I'm essentially investing in America, for better or worse. 'Murica, y'know.
« Last Edit: December 11, 2017, 05:16:10 PM by nexus »

WootWoot

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Re: Just changed investments, or, am I going to go to hell?
« Reply #4 on: December 11, 2017, 05:25:38 PM »
nexus, thank you for weighing in. Something to think about.

In the meantime, I looked at CREF's Social Choice R2 has an "estimated expense charge of .38%". What the what?! The Target Fund I have with CREF says
Gross / Net Expense Ratio
0.78% / 0.67%

Does this mean what I think it means--that it's costing me an arm and a leg to have these two accounts??

Holy mother of a moose...

Frankies Girl

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Re: Just changed investments, or, am I going to go to hell?
« Reply #5 on: December 11, 2017, 05:25:43 PM »
https://livingafi.com/2016/06/17/unloading-guns-from-a-portfolio/
^Dr Doom's blog entry on socially responsible investing

http://jlcollinsnh.com/2017/08/21/stocks-part-xxxi-too-hot-too-cold-not-pure-enough/
Jim Collins' take on it (third part of this section "not pure enough")


My personal opinion: I don't agree with the ethics of some of the companies I invest in through the index funds I hold. But I also don't agree 100% with any one really - politicians, charities, specific programs or what have you - there's always going to be a few ants at the picnic as it were.

I don't sweat it tho. I go ahead and invest in the broad market index funds, because I know that I'm leaving the entirety of my estate (which will likely be substantial) to charities that are in line with my own ethics and morals. So in the end, they will benefit greatly, and I benefit greatly as well. That is enough for me and my own conscience. YMMV.

maizeman

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Re: Just changed investments, or, am I going to go to hell?
« Reply #6 on: December 11, 2017, 05:30:35 PM »
Socially conscious funds tend to lag the market a little. For example, since the bottom of the 2009 crash, CREF social choice equity has returned 234% and vanguard total stock market has returned 272%. So if you'd put $100k into social choice equity you'd be down a net of $37,000 at this point.

The question you need to ask yourself is whether you are doing more good for the world by investing in only companies which engage in business you find is ethical, or by taking some fraction of the difference between those two numbers and donating it directly to organizations fighting to make the world a better and more ethical place (I'm not listing them here because different people probably have widely different priorities about what the important problems to solve in the world are).

Maybe, for you the answer is that you're honestly not comfortable investing in index funds that own pieces of businesses you disagree with. Maybe you are comfortable with making the investments as long as you also offset it by donating some of your additional gains to organizations advocating for things you care about. Maybe knowing that your buying shares of the company's stock doesn't go to any of the people who are actually doing the things you don't want done is enough and you don't feel the need to do offsets.

There's nothing wrong with any of the three answers, it's all a matter of deciding what you are comfortable with.

Note: moral offsetting is an area of open debate in modern philosphy. If you want to read more about it I highly recommend this article on whether or not moral offsetting is more effective than becoming a vegetarian for minimizing animal suffering: http://slatestarcodex.com/2017/08/28/contra-askell-on-moral-offsets/

maizeman

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Re: Just changed investments, or, am I going to go to hell?
« Reply #7 on: December 11, 2017, 05:31:20 PM »
nexus, thank you for weighing in. Something to think about.

In the meantime, I looked at CREF's Social Choice R2 has an "estimated expense charge of .38%". What the what?! The Target Fund I have with CREF says
Gross / Net Expense Ratio
0.78% / 0.67%

Does this mean what I think it means--that it's costing me an arm and a leg to have these two accounts??

Holy mother of a moose...

TIAA-CREF's lifecycle funds as a very bad deal compared to just holding the underlying funds.

https://forum.mrmoneymustache.com/investor-alley/why-are-tiaa-cref-lifecycle-funds-such-a-terrible-deal/

Retire-Canada

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Re: Just changed investments, or, am I going to go to hell?
« Reply #8 on: December 11, 2017, 05:40:08 PM »
I invest in broad market index funds. I spend according to my principles.

WootWoot

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Re: Just changed investments, or, am I going to go to hell?
« Reply #9 on: December 11, 2017, 05:50:31 PM »
I guess I have some thinking to do.

Better late than never, both in investing and in finding out about these ERs. Thank you, folks.

terran

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Re: Just changed investments, or, am I going to go to hell?
« Reply #10 on: December 11, 2017, 06:44:30 PM »
Also remember that investing in a company is not the same as buying products from a company. It helps that company in the sense that if its stock price goes up it is believed to be doing something right, but you didn't benefit that company directly, you benefited someone selling that stock. If your investing in an index the most that could be said is that you helped keep that stocks value up proportionally to the index whereas if you buy a social index that excludes that stock you depressed the value of that stock compared to the index of the normal/non-social fund.

WootWoot

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Re: Just changed investments, or, am I going to go to hell?
« Reply #11 on: December 12, 2017, 12:00:01 PM »
Good point. I hadn't thought of it that way.


Also remember that investing in a company is not the same as buying products from a company. It helps that company in the sense that if its stock price goes up it is believed to be doing something right, but you didn't benefit that company directly, you benefited someone selling that stock. If your investing in an index the most that could be said is that you helped keep that stocks value up proportionally to the index whereas if you buy a social index that excludes that stock you depressed the value of that stock compared to the index of the normal/non-social fund.