When it comes to investing, most defined contribution plan participants focus simply on the bottom line — the rate of return generated and how much money they made. Many investors don't consider that the companies in which they invest might violate their strong personal beliefs.
The good news is that investors don't have to compromise their values if they invest in a morally responsible manner. Research shows the average equity fund with a moral bent has outpaced the Standard & Poor's 500 index over the 10-year period ended Dec. 31, according to Morningstar Inc. This proves that one can build a portfolio that generates both financial and moral returns.
Morally responsible investing is a subset of the more commonly known socially responsible investing, which often screens out companies engaged in tobacco, alcohol, nuclear power, defense, oil and “unfair” labor practices. According to Morningstar, there were 198 SRI funds representing $65 billion in assets as of Dec. 31. Morally responsible funds can be different in that they might screen out companies that conflict with moral values such as abortion, embryonic stem cell research and pornography.