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Monday, February 4, 2013

Stacking Up Green Funds

Every category of investment has under-performed over the last several years, so it is difficult to be excited about retirement planning.  Maybe a fresh approach is needed to keep it interesting and to get the portfolio going in a better direction.

Several years ago, Triple E adjusted retirement investments to include a greater proportion of funds featuring environmentally responsible organizations (aka Green Funds).  This was, in a sense, an alignment between heart and portfolio.  Because many Green Funds now have a 10-yr plus track record, it is time to revisit and compare them.

General strategies employed by Triple E when planning retirement investments: (1) start contributing to 401K, IRA, or SEP as soon as possible, (2) view retirement investment as a marathon not a sprint, (3) invest based on 5-yr to 10-yr past performance, (4) accept risk/volatility inversely proportional to age at time of investment, (5) consider no-load funds over funds with a load or service fees,  and (6) increase % of pre-tax income contributed each time you get a pay raise from employer. 

After a tour of many unnamed blogs and online articles, it was disappointing to see that performances were rarely reported.  Upon examination of the so-called 'Top Green Funds,' many were losing value faster than a typical index fund.  This is not to say that good ones aren't out there (see below), but rather a criticism of those writing articles without showing any data. 
Triple E Agent Assignment:
Locate promising Green Funds, summarize holdings and long-term performance...
Are there any salient Green Funds to consider?

Past performance of numerous funds were examined using online Fidelity search and 'compare chart' tools. 
Disclaimer: 'Past performance is not indicative of future results' and consult a financial professional before making investment choices.
Four funds are shown in the chart below, in no particular orderFund names and symbols are as follows: Portfolio 21 Fund Class R (PORTX),  Fidelity Select Environment and Alternative Energy Portfolio (FSLEX), Green Century Balanced Fund (GCBLX), and Alger Green A Fund (SPEGX).

Green Fund Comparison
Hypothetical Value of $10,000 Invested 10 Years Ago (Source: Fidelity)

You can see from the chart above that Triple E only included funds that would have increased from an initial value of $10,000 to $17,500 or more over the last 10-yrs.  The value of FSLEX increased at the lowest rate (~5.8% per year), while PORTX increased at the highest rate (~8.4% per year).  These values were not adjusted for loads or fees.  Approximate percent increase may not be an indicator of what the future holds, see disclaimer above, but it seems like we can have hope when investing in Green Funds.

Please keep in mind that, in general, these funds 'invest primarily in common stocks of companies that the fund manager believes are leaders in managing environmental risks and opportunities.'  Google, IBM, and Apple Inc are examples of such companies that are commonly among the funds' Top 10 holdings tabulated below.

 Top-1st  Google  Danaher Corp Apple Inc Apple Inc
 2nd  Novo Nordisk  Emerson Elec Co Minerals Tech Inc Google Inc
 3rd  Roche Holding  Air Products & Chemicals Inc Nordstrom Inc Coca-Cola Comp
 4th Samsung Electronics Republic Services Inc IBM Inc
 5th  Novartis AG Iberdrola SA  Costco Wholesale Corp IBM
 6th  Baxter International Ashland Inc Baxter Intl Inc Johnson & Johnson
 7th  IBM Stericycle Inc Cisco Systems Inc Pfizer Inc
 8th  Svenska Cellulosa Ecolab Inc  Wells Fargo & Comp  Discovery Comm. Inc
 9th  Apple Inc  Ingersoll Rand Inc  General Mills Inc Procter & Gamble Comp
 10th  Novozymes Eaton Corp PLC AFLAC Inc ITC Holdings Corp

The intent of this article was to explore mutual funds that are suitable, in the author's opinion, as long-term low-risk investment options.  For more specifics about individual Green Stocks, you may enjoy this article Top 10 Green Stocks.  Some of the Top 10 holdings above appear on the individual Green Stock list too. 
Views expressed by Triple E should not be interpreted as an endorsement, or approval of any organization nor as recommendation to buy, sell, or hold any particular securities.
Proceed with Caution,
Triple E.

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