It may make your heart feel good, but the Sierra Club Stock Fund charges a high price for that feeling.
Photo:Rob_'s, Creative Commons, Flickr
The Sierra Club (FSUSX) has environmental cachet, so when you hear about the Sierra Club Stock Fund, the first insinct may be "Hey, great! I can invest in a mutual fund that I know is environmentally friendly!"
And it is great. Sierra Club mutual funds, and particularly the Sierra Club Stock Fund, use vigorous screening criteria in order to ensure that the companies included are mostly environmentally friendly. No compromising, either. No "best in class." Sierra Club mutual funds completely avoid Big Oil and the auto industry.
The Sierra Club Stock Fund includes such big players as Google, eBay and Amazon, as well as companies one would expect to see in an environmentally friendly mutual fund (PowerShares Wilderhill Clean Energy Portfolio, for one). And the fund isn't doing too badly. It isn't quite where the S&P 500 is (Sierra Club mutual funds are on the S&P), but it's pretty close. And the growth potential is good, despite the fact that the fund is off to a shaky start this year (get in while the price is low, maybe?)
The good news is, as of May 1, the Sierra Club Stock Fund dropped its expense ratio. The net is now about 1.24% (down from 1.29%). But the bad news is, with mutual funds come fees. This mutual fund comes with a load fee of 5.75%. Plus, starting July 1, if you try to redeem or exchange your shares less than 180 days (it used to be 60) after investing, a redemption fee of 2% is charged.
The Sierra Club Stock Fund is managed by Forward Management. Supposedly, Forward Management takes the environmentally stiff criteria given by the Sierra Club and applies a test before including companies in the fund. There is even a disclaimer stating that some companies that perform well can be removed at anytime if their practices fail to live up to the environmental standards of the Sierra Club. Proxy voting is done by the fund managers, but mutual fund shareholders are welcome to view the voting history, and to review management and shareholder resolutions.
Bottom line: It might feel good to invest in the Sierra Club Stock Fund, but the fees are atrocious. Indeed, a rather substantial chunk of your investment goes to fees (if you invest $10,000 the load would be $575 — nearly $600!). You might be better off looking into no-load mutual funds that have a good number of the same companies that are part of the Sierra Club Stock Fund.
Disclosure: I do not own shares in the Sierra Club Stock Fund. I will probably not invest in this mutual fund.