Investing in the Advancement of Hispanic Women
By Paul Roldan
Principal Allgen Financial Services, Inc.
Once again LATINA Style magazine challenges the world with its claim that investing in Latinas makes sense on all societal fronts. Since 2001, LATINA Style magazine has recognized U.S.-based companies and organizations that are committed to diversity and inclusion in their respective workforce, especially those that provide career advancement opportunities for Hispanic women. Each year, LATINA Style magazine chooses 50 companies (LS 50) via an extensive survey 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.
After several years of honoring such companies, LATINA Style magazine, in its mission to promote the advancement of Latinas at all fronts, posed an interesting question: is it economically prudent to invest in companies that are committed to the advancement of Latinas in the workplace? While many have made the case that women in business at all levels makes sense, LATINA Style magazine took this a step further by asking if this was true even from an economic perspective.
Socially responsible funds (investment funds that use certain value or moral principles by which to invest, such as not investing in casinos or tobacco companies) have been questioned as underperforming the stock market at large due to the restrictions they place on themselves, limiting the available investment options for investors. While potentially satisfying an investor’s quest to promote or fulfill a moral or philosophical value, at the end of the day, investments are judged by performance or total return.
Several years ago, LATINA Style magazine put this theory to the test using its own socially responsible criteria: investing in the LS 50. LATINA Style magazine commissioned Allgen Financial Services, Inc. (www.allgenfinancial.com), a registered investment advisory firm based in Florida, to test and compare the returns of investing in the LS 50 as compared to the stock market at large. Using the S&P 500 index to represent the market at large, Allgen Financial Services, Inc. compiled yearly returns of the S&P 500 versus yearly returns equally allocated among the LS 50 for the respective years*. Previous years’ studies have shown that investing in these companies could prove to be a wise investment purely from an economic perspective. And using the companies chosen in 2014 continues to prove this to be the case.
As shown in the chart, an investment in the LS 50 index since 2001 continues to provide better investment results than an equal investment in the S&P 500 over the same time period. The yearly average for the LS 50 was 4.07 percent better than that of the S&P 500 from 2001 through 2013. In real dollars, a $10,000 hypothetical investment in the LS 50 in the beginning of 2001 would have resulted in a final account balance of $29,525 while an equivalent investment in the S&P 500 would have resulted in a final account balance of $18,041 at the end of 2013. That is a 64 percent positive cumulative difference 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 greater positive gains versus the same investment in the S&P 500 even amidst these challenging economic times.
Average Annual Return since 2001*
LS 50 Index 10.75%
S&P 500 6.68%
As seen in the graph, investing in the LS 50 for this period would have almost tripled an investor’s money whereas a similar investment in the stock market would have not quite doubled the initial investment. Even with the anomaly in 2011 where the LS 50 decreased -5.95 percent versus the S&P 500 growing at 2.11 percent, longer term returns have consistently shown the LS 50 outperforming the S&P 500 index overall. As such, these results have affirmed again that investing in companies that live out responsible, social practices, as do the LS 50, can be morally beneficial and financially prudent.
*This analysis is based on available data at the time of analysis. Some company performances have been omitted as they no longer exist or were not publicly traded. This analysis and returns are also based on a yearly rebalancing of the portfolio to take into account the different companies that are chosen as part of the index each year and an equal weighting of each company. In addition, the measured performance and conclusions derived therein reflect a retrospective look at market performance as the study is conducted after the companies have been selected. It is never prudent to invest based on historical stock performance alone. In addition, the LS 50 index is not a real market index but rather a dynamic collection of companies as chosen yearly by LATINA Style magazine.
As such, the above article should not be construed, nor is it written to provide financial advice as individual situations may vary and past performance is not indicative of future results. Any decision to invest in equity markets should be consulted with a financial professional.