What is an exchange traded fund (ETF)?
Exchange traded funds (ETFs) are index-tracking funds that trade like stocks. Often referred to as a basket fund, an ETF is a collection of securities that mimics a particular index (e.g., Standard and Poor’s 500 Composite Index). The intent of the fund is to track the index.
Introducing Faith-Based ETFs
Faithshares, the first faith-based exchange-traded fund provider will open for business this summer with the rollout of five new ETFs. Headed by Tom Phillips and Garrett Stevens of T.S. Phillips Investments, the company seeks to offer ETFs that are designed to adhere to the investing principles of five major Christian denominations-Catholic, Baptist, Lutheran, Methodist and non-denominational. Here are they types of companies the funds will exlude:
* Those involved in the alcohol, tobacco, gambling, and pornography industries.
There are now millions of religious investors attempting to align their morals and values with their investment portfolios. Religious concerns have long been a factor in the investment process because investors have wanted to avoid companies that contradict their belief system. This began with social screens such as alcohol and tobacco and has migrated to moral issues such as pornography and abortion.
There has also been a recent movement for investors to reassess their financial priorities in light of the corporate and mutual fund scandals that have surfaced over the last ten years. People are looking for more meaning in their lives and ultimately to make a more positive difference with their investments. This has led to the desire and ability to screen for more social and moral issues.
More Investment Options
The rise in the number of faith-based mutual funds and money managers has opened the door to new avenues of investing. There also has been a surge in the level of sophistication in research available to advisors, money managers, and individual investors. As a result of this movement and awareness, millions now have the opportunity to put their money where their values are.
The appropriate starting point for any investment should include having a noble purpose as well as developing a process to maximize moral integrity. It is not just whether you should compare the harm of investing in one company vs. another company. It is more about trying to avoid the “blood money” that results when you invest in companies that are not in line with your beliefs. If you participate through your investment dollars in things you do not agree with, you are still enabling that activity. More important, when you send money into a mutual fund that invests in things that are objectionable to you, your moral integrity has been compromised.
The limitations of your knowledge should not blind you to the fact that there is a moral responsibility when you invest. If you look the other way when others are doing wrong, you are still morally responsible. So how do you invest in a manner that reflects your morals and values?
The first part of the process is to determine what is truly important to you. Is God a top priority in your life? Are you looking for balance and consistency? Doesn’t it make sense to include your faith in all areas of your life–finances included?