Socially Responsible Investing (SRI) Funds have grown huge in recent years. It is estimated that there are close to 200 SRI funds with assets of $2 trillion. I wouldn’t consider investing in an SRI fund as diversification from the stock market because they contain many of the same stocks as other funds. For instance, the Domini Social Equity Fund (DSEFX) holds many S&P 500 stocks, especially techs, so you’d have to account for that in your other holdings to prevent becoming overweight on tech stocks.

Morningstar reports that SRI funds generally have higher expenses than non-SRI funds. With the vast number and variety of funds on the market today, I feel the surest bet is to find a good fund with the lowest expenses.

There’s still a lot of development going on overseas. I think the thing to do is throroughly investigate whatever you are investing in, domestic or international. I am also beginning to explore SRI funds. Seems like the right thing to do. Also, I think the tides is turning, and there will be strong SRI funds down the road.

Dan, this is where I have to disagree with you. I think the whole thing is a wash. Remember, most big international companies also have exposure in the U.S. In the end, we should really look at GDP or market capitalization (by both measure the U.S. is about 50%).

RacerX, as long as we can stay on top of technology and information, we can survive being the world’s favorite place to sell. Interestingly, China and other countries are also investing in the U.S. Toyota just built a truck plant in my city that has benefited the local economy.

Dough Roller, your investments would be worth even more if you had first converted your dollars to euros and then invested in foreign stocks through Europe. It would have introduced several new risks, however. I think the important part is to slowly build a portfolio that has exposure to other markets to help smooth the overall fluctuations in the portfolio value.

@RacerX – And that’s just China.

@Dough Roller – Good input. You’re wise to have that much in international already. I only have about 28% now. But to shift to 45% in international now feels like chasing performance to me — buy low, sell high?

And that is with a really depressed dollar. Scary to think what would happen with a strong dollar policy, that many (incl. Buffett) are up in arms about!

The MSCI All-World Index (traded under EFA) is a market cap weighted index that tracks all equities in the 23 developed markets. There is also the MSCI All Country World Index that adds the 25 developing markets (for example, China, India, Russia, Brazil). Investing in the developing markets can be achieved through ticker symbol EEM. To own the whole world equity market indexed by market cap mix: 1) 50% – US Total Market (VTI), 2) 45% – Global Developed Markets (EFA), and 3) 5% – Global Developing Markets (EEM).

It is good that these American companies now derive income from outside the US but I’d recommend using an index and buying the entire world equity market. In this way you do not let your proximity bias keep you over-weight in US equities.

P.S. Don’t forget to throw in real estate, short and long bonds, commodities, etc to get a complete asset allocation.