By Humberto Cruz Tribune Media Services One of the knocks of socially responsible funds up to now had been their relatively high expense ratios, which often include annual marketing and distribution fees. These annual expenses, which have averaged between 1.5 percent and 2 percent, have often been blamed on the costs of investigating the companies and running the social screens. Even index funds that mostly buy and hold a portfolio of stocks such as Citizens Index and Domini Social Equity charge annual expenses of 1.58 percent and 0.95 percent respectively. But Vanguard is offering its new social index fund with an annual expense ratio of just 0.25 percent. Because annual expenses reduce investors return dollar for dollar, the new low-cost funds offer the strong likelihood of higher returns compared to similar index funds.
Investors can also choose from funds that meet their own definition of socially responsible.
The least restrictive, the Bridgeway Ultra Large 35 Index Fund , excludes only tobacco stocks. The Calvert and TIAA-CREF screens are among the toughest, eliminating any company that fails in just one area. The company considers the environment, tobacco, weapons manufacturing, gambling, nuclear energy and workplace issues, including adherence to the MacBride Principles of fair employment practices in Northern Ireland. With this fund you clearly know what will not be in the portfolio, Pinto said, while some other funds will be more lenient. The Domini Social Index, for example, balances strengths and concerns in areas such as the environment, diversity and employee relations.