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How to invest in bonds with absolute ethical confidence

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Some bonds are more ethical than others for individuals, says Charles Sandmel, a veteran of the municipal bond market. Mr. Sandmel, a certified financial planner in Brookline, Mass., and representative of First Affirmative Financial Network, shared his insights about bonds and socially screened stocks on a Monitor webcast. Here are edited excerpts of that conversation with the Monitor's Laurent Belsie:

Why has it been such a turbulent quarter?

Sandmel: You have forces pushing stocks in both the upward and downward directions. You have a strong economy if you look at the GDP numbers. You have relatively low unemployment if you look at the unemployment rate. On the other end, you have wildly volatile stock prices, you have natural disasters in the Gulf [of Mexico]; you have fear of higher interest rates while the Fed keeps raising interest rates; you have questions about how strong the housing market is. So I don't see things getting any calmer over the next three months to a year.

Should investors head for safety?

Most of what I tell clients to do is to diversify their portfolios to make sure that they are not betting on one series of news events. For me, that's the most important part of having a stable and steady gain in a market.

Are there special dangers now for the ethical investor?

I think so. The last two or three years have been a perfect storm for ethical investors in that the market leaders have been in the things that most of them avoid, such as energy. If you look at the last 12 months, the Dow Jones is up less than 1 percent and so is the S&P. The energy sector is up 43 percent. So if you're not buying Big Oil because of the pollution problems, you're losing out on a lot of that income at this point in the game. So investors who are screening their portfolios need to find ways to work around the current outperformance of the things that they're avoiding.


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