Stocks Section

Ethical Stockmarket Funds Might Be a Cynical Joke

September 2005

As we progress into the new century one thing is becoming clearer by the day, money and the word 'ethical' don't mix that well. And you can either complain or harp on about the old days or just accept it and concentrate on getting the best home for your capital.

Of course, there is ethical and ethical. Employing child labour is a lot different for many people than exploring and drilling for Oil off the east coast of Africa.

What Are Ethical Funds

• They are funds that don't invest in 'bad' industries such as arms manufacturing, tobacco and in some cases oil companies etc.
• But here lies the problem, most of the ethical funds have no consistency in what they're allowed to invest in
• So what is deemed as ethical to one fund is deemed as totally unacceptable to another
• And it's a complex connecting web so that a potential ethical company like Barclays is actually unethical by association because it say lends money to Rolls Royce which in turn manufacturers engines for bombers and fighter jets
• If your investments want to be 100% pure then that most probably exempts 95% of all companies on the stockmarket especially then you consider that big business as a whole runs itself on vicious predatory tactics

How Have Ethical Funds Performed?

• Compared to funds that have carte blanche to invest in any company of the stockmarket the performance has been bad
• Ethical funds also tend to experience more volatility than other funds because their investment options are limited to only certain sectors and/or stocks
• This means that the funds can't often spread the risk around

Summary

Some argue that ethical funds are nothing more that a cynical plot devised by the marketing departments of the fund management companies. And if you invest in ethical funds then you must not complain if/when the funds underperform the general market because you cannot have it both ways, ie unethical companies tend to be major money earners.

If you're really concerned about investing with an ethical approach then perhaps the best solution would be to either avoid the stockmarket completely and stick to deposit accounts and property or assets like antiques/art. Or perhaps better yet create your own personal ethical fund and only invest in companies that you've fully researched and are happy with.

Good luck with your ethical investments, chances are you'll need it :)

See Also

• Ethical Building Society
• Co-operative & Community Finance
• Profit With Principle - An Ethical IFA

PS. We have no experience with any ethical IFAs (Independent Financial Advisors) but some good advice is to check their charges and what type of fees they levy because they have no excuse to be charging more than a plain vanilla IFA. In fact high charges might be the paradox that they themselves are unethical and jumping on a bandwagon to make money.......