Today marks a big day for me. (Well, okay, not really that big, in fact it’s barely even blogworthy, but I feel like I need to inaugurate the new website with a post of some sort).

In 2001 my dad convinced me to take some of the money I had made over the summer and use it to open an IRA. (Smart advice eh?) He gave me the Vanguard pamphlet which listed their various mutual funds to choose from. Trying to figure out which of them was best for me was making my head swim, and none of them really stood out except one – the Vanguad FTSE social index fund. Given how little I understood the market at the time, and my general predilection towards “doing good”, I decided to invest my money there. After all I reasoned, the whole point of a mutual fund was to try and reduce your risk by diversifying your assets, so it didn’t matter that much which specific assets you chose. As long as the same “professionals” were making the choices, a fund which had a slightly smaller number of stocks to pick from still had plenty of options when it came to making it’s investments so it should have been fine.

Fast forward to today. In the past few years I’ve learned a lot more about how the market works, and the one truism that I have learned is that in the long run nothing beats index funds. The reason is simple – the more overhead there is in the form of managerial fees, the more you start at a disadvantage when compared to an index. In fact, my all-time favorite columnist Greg Easterbrook has repeatedly written about how hedge funds, the venerated and envious investment clubs for only the rich don’t even beat simple index funds. (If you follow the link, scroll down about 85% of the way, or search for the phrase “hedge fund”). When reviewing the performance of the social index fund when compared to Vanguard’s S&P 500 index fund, I can find almost no reasonable period of time when the social index fund outperformed the S&P 500, and many times when it underperformed, often times by a lot. That is why today, I put in the order to convert all my holdings in the social index fund to an S&P 500 index fund.

Now this of course brings us to a little point of mathematical interest. If the S&P 500 is considered to be the “average” of the market, and the socially conscious companies have been doing worse than the average, this can only mean that non-socially conscious companies are performing above average. The answer to this conundrum: the vice fund. Founded in 2002, the vice fund invests in alcohol, tobacco, firearms, gambling, and the defense industry. Unsurprisingly it has been regularly beating the S&P 500 in both good and bad markets, despite an expense ratio of 1.75%. (About 7 times that of my social index fund).

…one of  the visionary minds of the 20th century.  If you have ever been to Rama, or wondered about the year 2001 (before we got there), then I know you will note with regret, as I did, the passing of Arthur C. Clark today.