TD Ameritrade 300

Best Brokerage Companies For Socially-Responsible Investing: TD Ameritrade, Scottrade, Fidelity, and Charles Schwab.



Overview of Socially-Responsible Investing


Traders who are concerned about the business practices of some of the stocks they buy and sell should take a look at socially-responsible funds. These are ETF’s and mutual funds that invest in companies that meet specified criteria, such as an environmental record. Companies that don’t manufacture certain products, like tobacco or firearms, also are candidates for purchase in the socially-responsible investment world. The number of funds that incorporate some type of social, religious, or political outlook has quadrupled in the past decade, with total fund assets now in the trillions.


Purposes of Socially-Responsible Investors


Socially-responsible investing attempts to both make a profit and defend philosophical goals. Accomplishing both objectives at the same time isn’t always easy, which makes this style of trading all the more difficult. Nevertheless, some investors want to make sure their values are protected when making financial decisions.

They can do this by investing either in specific companies or in socially-responsible funds. Today, there are many mutual and exchange-traded funds that incorporate at least one socially-responsible objective. Purchasing a specific business that manufactures a certain product, like solar panels, is another way to make socially-conscious investment decisions.


Socially-Responsible Mutual Funds at Fidelity


Fidelity’s mutual fund screener can search specifically for socially-responsible products. It returns 304 securities. They cover a wide swath of investment categories and objectives. Some of them are small blend funds, while others are large growth funds. Some have 4 stars from Morningstar, while others just have 1.

One fund in particular is SPEGX. Alger Responsible Investing Fund only buys and sells companies that have a high environmental, social, and governance (ESG) rating from MSCI. Companies that are involved with alcohol, gambling, weapons, adult entertainment, or nuclear power are automatically excluded. Also on the list is genetically-modified organisms, and this includes genetically-modified foods.


Fidelity Socially Responsible Investing Review


The fund’s stringent standards don’t seem to impress Morningstar, who gives it just 2 stars. SPEGX has a 10-year annualized return history of 0.59%, although its 1-year history is a very impressive 11.46%. The fund has a current dividend yield of 1.13% and total assets of just $33.6 million.

At Fidelity, SPEGX can be purchased with no transaction fee. However, it does have a front-end load of 5.25%. The charge begins dropping with an initial investment of $25,000 or more and reaches zero percent at a million dollars.

Learn more in Fidelity brokerage review.


Socially-Responsible ETF’s at Schwab


Investors at Schwab can search for socially-responsible exchange-traded funds using the broker’s handy screener. The tool can look exclusively for ETF’s that have noneconomic goals. It returns 48 products in total. Six of these trade commission-free.

One such fund is KLD, iShares MSCI USA ESG Fund. KLD excludes all tobacco companies from its portfolio. Most of the equities the fund owns are US companies. The largest holding is Microsoft, and the fund has an underweight in financials.


Charles Schwab Socially Responsible Investing Review


Morningstar has graded the fund 3 stars. Its performance history has a noticeable degree of volatility in it, returning -35.83% in 2008, and 30.37% in 2009. KLD has half a billion dollars in assets, and an expense ratio of just 0.50%.

Buying the fund at Schwab costs $4.95 per trade. KLD pays a quarterly dividend, and Schwab customers can sign up for a free DRIP service.

Learn more in Schwab brokerage review.


Socially-Responsible Stocks at TD Ameritrade and Scottrade


Scottrade is now owned by TD Ameritrade. Learn more in Scottrade brokerage review.

TD Ameritrade has a nice stock screener that can search using a wide variety of criteria. Socially-conscious is not one of them, although various categories can be selected that are often included in socially-responsible funds. For example, it’s possible to look specifically for companies that manufacture health care products. It’s also possible to exclude equities that are involved in tobacco or the defense industry.

The TD Ameritrade equity screener returns 1,150 health care stocks. These results can be sorted by a variety of criteria, including dividend yield, EPS growth, and S&P Capital IQ rating.


TD Ameritrade Socially Responsible Investing Review


One stock that appears in the broker’s search results is Abaxis, Inc. It trades on the Nasdaq around $47 with the ticker symbol ABAX. It manufactures medical equipment and is classified as a small cap growth stock. TheStreet.com has a buy rating on the stock, while Ford Equity Research has a hold, and Credit Suisse rates it as underperform.

The stock currently pays a dividend and is yielding 1.18%. Its 52-week high is $56. Its P/E ratio currently is 32.2, which is rather high. ABAX has slightly underperformed the S&P 500 over a 3-year period.

Purchasing the stock at TD Ameritrade costs $6.95 per transaction. The stock has options currently trading, and those cost 75¢ per contract.

Learn more in TD Ameritrade brokerage review.

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Morningstar Sustainability


A new method of analyzing how well the companies in a fund meet ESG criteria has been released by Morningstar. Called the Morningstar Sustainability Rating™, the score judges a fund based on how well the companies in its portfolio do on ESG criteria. The score is then used to compare the fund to its peers. This comparison is shown on a 5-point scale from high to low, similar to the analyst’s star rating.

More than 20,000 funds around the world now have been ranked by this evaluation. Besides looking at products and industries, like gambling, the scoring system also takes into consideration shareholder participation and company relations. Mutual funds that don’t have an explicit socially-responsible mandate are also graded by Morningstar’s rating.


Morningstar Socially Responsible Investing


One fund that has been ranked by this new scoring model is AVEMX. The Ave Maria Catholic Values Fund has over $200 million in assets and an expense ratio of 1.2%. It has a sustainability score of 45, which places it above average against its peers. Ave Maria’s score places it in the top 12% in its category.


Best Brokers For Socially-Responsible Investing Summary


Investing successfully while defending a code of values isn’t easy. Nonetheless, the trend is growing. Resources are available on-line that make the investment process easier.


Updated on 4/10/2017.



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