NEW YORK (MainStreet)—For Penn State alumni like David Ketchen Jr., revelations about the Jerry Sandusky child abuse scandal were devastating. Adding to the pain for Penn Staters, Ketchen believes, was ESPN's coverage of the scandal, which he thought sensationalized the story and questioned "the integrity of an entire university."

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So Ketchen, an investor and business professor, decided to take action. He held stock in Disney, which owns ESPN, but concluded he could no longer be a shareholder in light of the Penn State coverage.

"The stock had done quite well for me, and, as a business professor, I believed it would continue to do well -- I sold my shares anyway," Ketchen says. "I could not own a piece -- even a tiny piece -- of a company that had done a hatchet job on a fine university."

Like Ketchen, nearly every investor at some point finds himself dealing with a moral dilemma involving investments. If a company you invest in engages in activities that you view as unethical or immoral, should you sell regardless of performance or consider another path?

The answer is rarely clear-cut in "a world with a lot of gray areas," says Chris Wang of New Jersey-based Runnymede Capital Management. For instance, Wang is a lover of Apple products but notes there are nagging questions about the company's handling of sub-contractors in China. Wang says before selling the stock, he would let his concerns be known, by writing to investor relations or staring a change.org petition that could help enlist many others to the cause.

"If that falls on deaf ears, or your worries grow too great, by all means sell the stock," he says. Wang points out that there are stocks he won't buy in the first place – specifically tobacco and defense companies. "I don't care how much money there is to be made in these areas," he says. "I wouldn't feel right owning them for myself or my clients."

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Yet, on the other side of the spectrum is Eric Rosenberg, a finance blogger at NarrowBridge.net. Rosenberg owns stock in tobacco companies such as Phillip Morris International and does so without reservation. He believes that buying a stock is different than supporting an "immoral company," noting that when stocks are bought on the New York Stock Exchange typically are just transferring ownership of existing shares.

"Of course, I don't want to see people get cancer from smoking, but someone is going to make money from the stock, and it might as well be me," Rosenberg says.

Brian Beatty, a partner Egan, Berger & Weiner, a financial planning firm in Northern Virginia, also cautions against making moral judgments when it comes to picking stocks. While Beatty has had clients make requests based on their beliefs (one requested a fund that only invested in countries that had animal cruelty laws on the books), he generally advises investors to focus on the financial fundamentals, not the moral implications.

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"Our goal is to help clients invest with financial wisdom versus using a moral or ethical guide -- and the investments they may be interested in may not yield the best return on investment," Beatty says.

Of course, investors that factor in moral or ethical issues need not go it alone these days. In recent years, Socially Responsible Investing (SRO) has grown rapidly. SROs are funds invested in companies that are deemed to be good corporate citizens.

While a company included in an SRO can provide some piece of mind, it is not always as simple as it may seem. Brian Frederick, a financial advisor with Stillwater Financial Partners in Scottsdale, Ariz., points out that what is considered socially responsible behavior is often in the eye of the beholder. For instance, should a company that has a sterling environmental record but lags in hiring minorities be considered socially responsible?

Meanwhile, Frederick says to keep an eye out for companies that may have been engaged in questionable activities but have made a concerted effort to clean up their act. If there is evidence the company has taken substantive steps, including replacement of top management, to rectify a situation, the stock might just be a good buy – and one you can make in good conscience.

"The first rule of investing is you want to buy low and sell high, having a company do something stupid and get caught provides that opportunity," Frederick says. "That is what value investing it built on – buying companies where there is more present value than what is being reflected in the stock price."

--Written by Scott Westcott for MainStreet