Stay True to Your Plan and Your Principles Advises DominiInvestment Firm Sees Long-Term Opportunities for Socially Conscious Investors as Domini Stock and Bond Funds Beat Their Indexes
New York, NY — Domini Social Investments LLC, manager of the Domini Social Equity Fund (NASDQ: DSEFX), today emphasized that turmoil in the US stock market should not lead investors to compromise their long-term investment strategy — or their ethical principles.
The Dow Jones Industrial Average, which peaked at over 11,000 in January 2000, dropped steeply in July, frightening investors and prompting many to sell their stock holdings and retreat to bonds or money market funds. At one point the S&P 500 had lost 48% of its value, roughly equaling its decline in the bear market of 1973-74. 1
“Just as chasing past performance is a poor approach to investment,” said Amy Domini, Founder and CEO of Domini Social Investments, “retreating from stocks during a bear market is also not the answer. Now as always, investors need to take account of their asset allocation, their time horizon, and their personal tolerance for risk. Those who have a disciplined investment strategy are well advised to stick with it.”
“Even if the US market takes several years to return to its previous highs,” Ms. Domini continued, “investors who have committed themselves to a strategy of dollar-cost averaging may find that by continuing to invest they will pick up shares at relatively low prices. As a result, when share prices rise they may see their own portfolios recover more quickly than the market as a whole.”
Dollar-cost averaging is a strategy through which investors put equal dollar amounts into stocks or bonds at regular intervals, thereby buying fewer shares when prices are high and more shares when prices are low.
Ms. Domini also had words of encouragement for socially responsible investors. “We’re entering an era in which government regulators and individual investors will be digging deeper into the activities of corporations. What they find will have an impact on companies’ profitability and share price.
“We believe that social and environmental issues pose material risks and opportunities to investors, and that companies with stronger social and environmental profiles are better prepared for long-term sustainability and profitability. Investors seem to be realizing this: the Wall Street Journal recently reported2 that while investors have been pulling their money from other mutual funds, socially responsible funds received $1.29 billion of new money in the first half of this year.”
Recent figures appear to support this view as well. The Domini Social Equity Fund held up somewhat better than the S&P 500 in the second quarter of this year, declining 12.14% for the quarter while the S&P 500 dropped 13.40%. The Fund’s avoidance of General Electric and scandal-plagued Tyco International alone accounted for more than 1.0% of this difference in performance. General Electric is excluded from the Fund because of its involvement with the weapons industry, and because it is a designer and marketer of nuclear power plants. Tyco is excluded because, among other reasons, the company’s rapid growth through acquisitions has made it difficult to assess its record on social issues.
Domini investors who have diversified their portfolios by investing in bonds also benefited during the quarter, as corporate scandals and fears of terrorist violence drove money out of stocks and into high-quality bonds. The Domini Social Bond Fund, which seeks to minimize volatility by investing in high-quality US government agency bonds, and mortgage-backed securities, returned 3.63% for the second quarter ending June 30, 2002, outperforming the Lehman Brothers Intermediate Aggregate Index, which gained 3.58%.
Domini Social Investments manages more than $1.5 billion in assets for individual and institutional investors seeking to create positive change in society by integrating social and environmental criteria into their investment decisions. Its flagship fund, the Domini Social Equity Fund (NASDQ: DSEFX), was the first socially and environmentally screened index fund and is the nation’s largest socially responsible index fund. The Fund includes companies with positive records in community involvement, the environment, diversity and employee relations, and excludes companies deriving significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. In addition to the Domini Social Equity Fund, the company also offers the Domini Social Bond Fund (NASDQ: DSBFX) and an FDIC-insured money market account (in partnership with ShoreBank), both of which focus on community economic development.
Additional information about Domini Social Investments is available on the firm’s website, www.domini.com. Domini’s 7th annual Proxy Voting Guidelines & Shareholder Activism booklet is also available free of charge by calling 800-225-3863.
The Domini Social Equity Fund’s average annual return was (-16.99%), (-10.54%) and 11.08% for the 1-year, 5-year and 10-year periods ended 6/30/02. The Domini Social Bond Fund’s average annual return was 3.58% and 9.96% for the 1-year and since inception (6/1/00) periods ended 6/30/02.
1“ Markets Continue Downward Trend,” New York Times, July 24, 2002.
2“ Socially Responsible Funds Get Nicked, Too,” Wall Street Journal, August 9, 2002.