[In light of my postings on my Facebook FSX application, I’ll also do the same here for my other portfolios (with real money as opposed to FSX’s virtual money). Though I won’t put the amount here, I’ll still put the position I have or currently targeting. I do have several portfolios, though I am still undecided on categorizing them. For the moment, my postings will comment on the all-ETF, multi-purpose, and taxable portfolio.]
iShares KLD 400 Social Index Fund (DSI) is an ETF that seeks to match the performance (price and yield) of the Domini 400 Social Index, which is the DSI’s underlying index. The ETF holds 401 securities (as of July 27, 2008) and puts its 99.8% holdings fully invested in stocks. The average annual turnover is 4%, and the total net assets are USD 58.3 million. Its inception date was November 14, 2006, and has returned -5.61% (as of June 30, 2008) since then. For comparison, S&P 500 has performed by -5.15% during the same period. It has been a difficult period for the market.
So, what makes the Domini 400 Social Index? The Index is a float-adjusted, market-capitalization-weighted (much like S&P 500), common-stock index of US equities. The Index excludes companies with main businesses in tobacco, alcohol, firearm, gambling, military weaponry, and nuclear power plant. Also excluded are companies that have controversial issues on human rights, labor standards, diversity, accounting, and product quality. The Index puts a positive screen on companies that have strong relationships with their stakeholders: communities, customers, ecosystems, employees, shareholders, and suppliers. As a result, the Index tends to overweight Information Technology sector (22% weighting as of June 30, 2008) and underweight Energy (6%) and Utilities (2%).
When selecting companies for the Index, KLD Research & Analytics, the Index maker, maintain the composition of the holdings to 250 companies under the S&P 500 Index, 100 additional large and mid-cap companies for sector diversification, and 50 smaller companies with exemplary social, environmental, and governance records. Its five largest holdings (as of July 27, 2008) are Microsoft, Procter & Gamble, Johnson & Johnson, AT&T, and Apple.
With an expense ratio of 0.5%, DSI is a viable alternative to mutual funds. And with a Beta of 1 (to S&P 500), it is also a viable alternative to S&P 500 index-tracking securities. Morningstar category for DSI is Large Blend (as of July 27, 2008). As such, I placed it under my core holdings, with a target position of up to 20% of my portfolio (subject to change, but for the moment, that is the maximum position I put for the large-cap US equity portion). As an anchor, DSI fits the bill due to its diversified, large-cap tilt, US-based, market-cap weighted, low expense, low turnover, and especially being the only socially responsible instrument at the moment with all those characteristics.