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Assessing the LATINA Style 50
Over the years, several mutual funds created what are known as “socially conscious” or “socially responsible” funds. These funds aimed at investing only in stocks of companies that abide by certain social principles. For example, one fund may decide to only invest in companies that are not tobacco related. Another may decide to invest in companies that are not related to the casino industry. Or a fund might combine these and other social or moral principles as a method for choosing investments. These funds, while noble in concept, have been critiqued regarding their ability to keep up with other funds that have a wider array of investment options since they are not limited by the socially moral criteria socially responsible funds adhere maintain. This criticism was tested in 2003 when LATINA Style had an outside company research and provided data regarding investing in their LATINA Style 50 (LS 50) companies.
Each year, LATINA Style chooses 50 companies named as being the most sensitive to Latinas’ needs and goals in the workplace and that provide the best career opportunities for Latinas in the U.S. In 2003, results of the research revealed that investing in the LS 50 companies provided a better return on investment than investing in the stock market at large as measured by an investment in the S&P 500. The composite LS 50 index outperformed the S&P 500 index by 6.1 percent in 2003. These results affirmed that investing in companies that live out responsible social practices, as do the LS 50, can not only be morally beneficial but financially prudent as well.
Several years later, LATINA Style decided to put this theory to the test again. The question posed is if this theory can still hold true even amidst tough economic times as this country has witnessed over the past couple of years. So, Allgen Financial Services, Inc. assessed the returns of the LS 50 index for the last five years (2003 – 2008) and measured those returns against the S&P 500.
As shown in the chart, once again, an investment in the LS 50 index provided better investment results than an equal investment in the S&P 500. The five year average for the LS 50 was 3.2 percent better than that of the S&P 500. In real dollars, a $10,000 hypothetical investment in the LS 50 in the beginning of 2004 would have resulted in a final account balance of 10,155.71 while an equivalent investment in the S&P 500 would have resulted in a final account balance of $8951.44 at the end of 2008. That is a 13.5 percent positive differential for an investor choosing to invest in the LS 50 index versus the S&P 500. In other words, an investment in the LS 50 would have resulted in positive gain even amidst these challenging economic times versus the same investment in the S&P 500 which would have resulted in a loss.
By Paul Roldan, Senior Partner
Allgen Financial Services, Inc.
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