Investors who seek to capture social trends by investing in alternative energy funds specifically, such as wind and solar portfolios, can expect wild volatility. But there is a way to capture that theme within a broader fund that has a better chance of keeping up performance-wise, even if it uses an exclusionary approach to stock selection.
Take the SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX). It's doesn't hold stocks that own oil, natural gas and thermal coal reserves. So investments in sectors like technology and financials are slightly higher than the S&P 500. Apple and Microsoft are core holdings in the 473-stock fund, but Exxon isn't.
So far this year, the SDPR fund logged a 10.93 percent return versus 9.93 percent for the traditional index ETF, the SPDR S&P 500 (SPY). And at an expense ratio of 0.20 percent it is fairly inexpensive, though still significantly more than SPY's 0.10 percent annual fee.
"The fund underweights energy and utilities and overweights other sectors," said Chris McKnett, head of State Street's global ESG investments business. "But you still get broad exposure." More investors have wanted to divest from fossil fuel reserves in the past 12 to 18 months, he said.
Daniel Kern, chief investment officer at TFC Financial Management in Boston, said though the ETF uses exclusion of stocks as an approach to portfolio selection, it remains well-diversified.
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International versions of a similar strategy, such as the SPDR MSCI EAFE Fossil Fuel Reserves Free (EFAX) and SPDR MSCI Emerging Markets Fossil Fuel Reserves Free (EEMX) ETFs, kick out carbon but are highly diversified portfolios. Performance-wise, they've slightly outperformed their parents, and they also have low expense ratios.
"The funds can become core parts of investors' portfolios," McKnett said.
That's easy to say right now given the prolonged slump for oil: The energy sector SPDR (XLE) is down 10 percent in the past three-year period, according to Morningstar.
"They're really new," said Todd Rosenbluth, director of mutual fund and ETF research at CFRA. "So there isn't much history."
Narrow investment focuses generally mean a rougher ride for investors.
Guggenheim Solar (TAN), the largest ETF in solar energy, holds many smaller international stocks, which can be highly volatile. It is up roughly 10 percent this year per Morningstar but down more than 22 percent over the past three years. A net expense ratio of 0.71 percent also worries experts.
"There's so much exposure to volatile emerging markets," said Neena Mishra, director of ETF Research at Zachs Investment Research.
"Wind and solar have had very bumpy rides," Kern said. "Their concentrated offerings mean that they're vulnerable to the ups and downs of renewables."
For investors who stay away from the niche socially responsible plays and focus on broadly-based counterparts to traditional stock funds, there's no performance penalty.
"Getting comparable performance and feeling better about socially responsible investments is a win for investors," Rosenbluth said.
As long as an investor's definition of winning means just keeping up.
— By Constance Gustke, special to CNBC.com