Mutual Funds to Match Your Lifestyle
Are you looking to invest in a mutual fund? Are you worried that the portfolio of stocks and bonds selected by the fund managers won't accurately reflect your core beliefs? Fear not; if you dig hard enough, you can probably turn up a niche fund that meets both your need for a solid return and your personal ideology (or lack thereof). Take one of these, for example:
The Vice Fund
Perhaps the most well-known niche fund is the Vice Fund, which ignores moral qualms and shoots straight for the seedy core of the stock market. The fund focuses on four sectors: defense/weapons, gambling, tobacco, and booze. As the fund's website proudly boasts in all caps, no other fund concentrates solely on these four sectors. As fund manager Charles Norton told the Financial Times in 2006, "[N]o matter what is happening in the world economy, people will continue to drink, smoke, gamble and nations will need to defend themselves. As a result, in general these companies tend to be steady performers in good times and bad—they are mostly insulated from economic slowdowns." In short, the fund has targeted four areas of the economy where it thinks demand is fairly inelastic whether for reasons of addiction or necessity as a hedge against market downturns. It works, too; for 2006 the fund had returns of over 23%.
So are the portfolio managers gun-toting, chain-smoking drunken gambling junkies? Not quite; the Vice Fund is built on an investment strategy, not a lifestyle choice. In the same interview with the Financial Times, Norton revealed that he's a suburban family man who doesn't smoke and rarely drinks or gambles. We can still hold out hope that he owns a tank or rocket launcher, though.
Ave Maria Mutual Funds
Of course, for every demonic financial instrument like the Vice Fund, there's a counterbalancing angelic fund that traffics in virtue. One example comes from Ave Maria Mutual Funds, which touts itself as "America's fastest-growing Catholic mutual fund family." "Virtue funds" like these only hold assets in companies that meet certain moral and/or religious criteria in addition to being deemed solid investment opportunities. According to Ave Maria's website, the fund managers first pick stocks and bonds they'd like to hold, and then the potential assets go through "a proprietary moral screening process developed by our distinguished Catholic Advisory Board" that eliminates "companies connected with abortion or pornography, or that offer their employees non-marital partner "˜benefits.'" According to the fund's most recent annual report, its heaviest holdings are in Gentex Corporation, a company that makes personal protective equipment for military and law-enforcement groups, which sounds like something the Vice Fund would be equally interested in.
The Timothy Plan
Ave Maria is certainly not alone, though. The Timothy Plan family of funds has a similar focus on Christian ideology, but with decidedly more fundamentalist rhetoric. According to the Timothy Plan's site, it is America's fist pro-life, pro-family, biblically-based mutual fund. It also claims, "If you are concerned with the moral issues (abortion, pornography, anti-family entertainment, non-married lifestyles, alcohol, tobacco and gambling) that are destroying children and families you have come to the right place."
What companies can't make a Timothy Plan fund's portfolio? Good question, and luckily the plan's website has a "Hall of Shame" outlining what godless companies don't make the cut. Usual suspects like Playboy and Anheuser-Busch are frowned upon, but so are many other groups one doesn't normally think of as child-and-family destroyers, including AmEx, Borders, both Coke and Pepsi, Prudential, Starbucks, and drug companies like Bristol-Myers Squibb, Genentech, GlaxoSmithKline, Johnson & Johnson, Merck, and Pfizer. (No word on whether these pharmaceutical companies are also excluded from the prescription drug coverage on the Timothy Plan's employee health benefit.)
Amana Mutual Funds
Christians aren't the only religious investors with their own funds, though. The Amana Funds make all of their investments based on sharia, or Islamic law. These principles are in some ways fairly similar to the Christian funds: no companies that make a significant amount of their income from pornography, liquor, and gambling. However, there are some other restrictions unique to the Islamic funds, including an avoidance of pork-processing companies, and since usury, or riba, is forbidden in Islamic law the funds have to avoid investing in interest-gathering financial institutions like banks. Having to avoid interest also effectively cuts the funds off from buying bonds and companies that have too much debt on their books. Moreover, since excessive portfolio turnover could be considered a form of gambling, fund managers don't swap out assets as frequently as other funds. Amana's turnover rates are just around 14%; estimates of normal mutual funds' annual turnover rates run as high as 85%.
Amana also helps its investors prepare for the Hajj, a Muslim's holy pilgrimage to Mecca. Part of the preparations for this journey include getting one's personal finances in order and clearing any debts they might owe, so Amana offers guidance to hopeful pilgrims. While services like these, as well as the underlying ideology, the funds obviously offer a unique opportunity for Muslim investors. However, the fund's strong performance (manager Nicholas Kaiser's picks regularly trounce their less-pious competition) has made it almost as attractive for non-Muslim investors looking for a place to put their money.
Socially Conscious Funds
Not all virtuous funds have religious underpinnings. Some just aim to invest in companies that meet certain social or environmental standards. Such funds generally look for companies that have good track records when it comes to human relations, environmental issues, product safety, corporate governance, and other issues.
Where does one find such companies? You can consult KLD's Domini 400 Social Index, which includes 400 companies that pass muster as socially responsible. (As you'd expect, companies heavily engaged in areas like weapons, gambling, tobacco, and nuclear power don't make the cut.) According to the index's literature, it includes 250 companies from the S&P 500, but since its creation in 1990, the Domini 400 has cumulatively outperformed the S&P 500, which means all those socially responsible companies must be doing something right.
However, the Domini 400 is an index, not a fund that you can invest in. Companies like Calvert pick up that slack, though, by offering funds that only hold companies deemed socially responsible. Calvert touts its trademarked "Double Diligence" research process that first finds attractive opportunities, then scours the companies' track records to decide if they're truly socially responsible enough to make the portfolio.
Ethan Trex grew up idolizing Vince Coleman, and he kind of still does. Ethan co-writes Straight Cash, Homey, the Internet's undisputed top source for pictures of people in Ryan Leaf jerseys.