“The only thing necessary for the triumph of evil is for good men to do nothing” ~ Edmund Burke
You may not want to believe this, but if you have any money in five of the largest, most widely used mutual funds, your values are probably being violated. In fact, I’ve researched, studied and examined 5 of the largest equity mutual funds based on their reported holdings and found that on average 59.5% of the companies being bought failed one or more screens(as of June 2010).
But what does that mean to you as an investor with strong moral values and convictions? Take a look and you’ll see that on average…
- 19.8% of the companies in these mutual funds are supporting Planned Parenthood, performing abortions, and/or funding embryonic stem cell research!
- 10.5% of the companies in these mutual funds are involved in producing, distributing, and/or promoting explicit sexual materials.
- 12.7% of the companies in these mutual funds are involved producing, distributing, and/or promoting anti-family entertainment.
- 58.2% of the companies in these mutual funds are offering same-sex benefits, and/or actively sponsoring, promoting, and endorsing homosexual activities.
- 1.4% of the companies in these mutual funds are involved in Tobacco and Alcohol production and distribution, and/or gambling.
Step One: It starts with you
The following is a list of causes and concerns that may affect your moral decisions. These hot buttons are the most common examples of issues that generate strong emotional responses. If any of these issues are of concern to you, I strongly advise that you begin to consider the implications of investing in companies that violate your internal moral compass. There are tools and research available to help you eliminate or minimize your involvement in these hot buttons.
Negative Screening: Screening issues and causes important to you out of portfolio.
Positive Screening: Screening issues and causes important to you into your portfolio.
Examples of negative screens
- Homosexual Activism
- Human Rights of the Poor
- Embryonic Stem-Cell Research
- Antifamily Entertainment
- Poor Environmental Record
Here is a question to ponder: Would you purposely invest money in companies involved in any of the areas listed on the hot-button list? After taking some time to examine this list of hot buttons, what issues, if any, most resonated with you? Are there any areas in which you wish to avoid investing in your financial life? If any of these issues ignite strong emotional responses, is your passion strong enough that you want to do something about it?
Examples of positive screens
- Helping the poor and underprivileged
- Creating cures for life threatening diseases
- Building and fostering their communities
- Operating with Judeo-Christian principles and ethics
- Producing products and services that enhance the lives of their customers and employees
- Producing wholesome, family-friendly entertainment
Step Two: Create a faith-based investment portfolio
This step involves three important components: research, screening, and finding alternatives.
- Research Companies: Determine what activities you do not want to support (e.g., abortion, pornography, anti-family entertainment, non-marriage lifestyles, alcohol, tobacco, gambling). After deciding, identify the companies involved. In order to do your own research or rely on the research of others, you need to fully understand what you are screening for. For example with abortion where will you draw the line? Will you only screen out companies directly involved in the abortion industry or will you also screen out companies donating to Planned Parenthood? How do you personally draw the line?
- Screen Investments After you have determined which companies violate your morals, you’ll need to check the funds and stocks that you hold in your portfolio. To accomplish that task, you will need to perform a portfolio screen by comparing the screened companies to the portfolios of various or specific mutual funds.
- Find Alternatives You will then search for companies that meet your financial criteria without sacrificing your moral integrity. You will have many choices. It is estimated that among the eight thousand or so publicly traded companies, less than 10 percent fail most screens.
Which Road Will You Follow? In dealing with your personal commitment of time and effort, there are two options. You can choose to use faith-based mutual funds or buy individual stocks.
Path One: Mutual Funds When selecting a faith-based mutual fund or funds, look beyond the fund’s name or category. The popularity of socially responsible investing has led many mainstream brokerage houses to create their own ethical investing funds. Such funds often sound good but promote a liberal ethic. The same can be said for religious-based funds as well. Check the fund’s screening policy. Select a collection of funds in line with your values, then evaluate them for risk performance and appropriateness before investing. Even if you are locked into a limited family of funds through your employer’s retirement plan, you can still weed out those funds with the highest exposure to ―sin stocks.
Path Two: Individual Stocks If you prefer a more hands-on approach, many tools are available. You can select your own stocks or hire your own manager to help you. Internet-based brokers allow even small investors to investigate and purchase stocks on their own. I recommend using Folio Investments, an on-line investment firm. This site offers individual investors the opportunity to build their own basket of hand-picked stocks from scratch for a reasonably low fee. You screen companies to ensure they do not violate the moral and social hot buttons you have chosen and also select companies that meet your financial criteria.
Let me know how I can help you on your journey!