Archive for February 23rd, 2010

Ethical Investing Dilemmas, Part 2: Stock funds in the 401k?

Tuesday, February 23rd, 2010

What do you really own, in your 401k?  Those shares of stock, those bonds – are they really the best way to invest in America’s future? Your future? The world’s?

If your 401k plan is like mine, you have some mutual fund choices – maybe even a lot of them. The mutual funds are either “passive” (index) stock funds, with a little of everything (within the index), or they are “active” (managed) stock funds… plus some bond funds. One example is the S&P500 index of most of the largest U.S. corporations.

Now, I save into the 401k because of how the game is rigged: I like to defer taxes until I actually need the money, and there’s the “free money” in the form of a “company match”. But I’m not happy with where I have to put my money in order to get those benefits. Do I really want to be financing the 500 largest corporations in the U.S.? Not all of them are exactly paragons of wise economic activity! Just look at what the fraud banking and health care sectors have been bribing lobbying Congress for… or the war-profiteers military-industrial complex… or the toxic junk & fast food vendors… or the telecommunications and power monopolies utilities… do I want to be investing in all THAT? Is investing supposed to be about profiting from the weaknesses of others, or about building up our collective strength? Even for otherwise reasonably productive large corporations, too often I hear about cutting quality in the name of profits, failing to actually serve their customers, and distributing rewards to management rather than shareholders.

That is not the system I want to be supporting and sustaining with my hard-earned savings. I cannot count on such a system to provide for my retirement, nor would I want to think that my last days of peace and relaxation were funded by such activities! So, I say no to the S&P500. And despite various fancy titles, unfortunately the other stock funds are pretty much the same witches’ brew.

No stock funds for me… So, what about bonds? This is long enough, so I leave that for the next post…