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Keeping Faith

Portfolio Overview

My book, Low Fee Socially Responsible Investing: Investing in your worldview on your terms, presents a mechanism for examining a collection of existing mutual funds with the purpose of identifying a common list of holdings that can be further filtered. Several faiths already have established mutual fund options available for their congregants to use in investment activities if they want some assurance that their investments align with their values.  Many faiths do not have an investment fund specifically targeted to their value set.

Faith-based investing is an important part of the broader area of socially responsible investing (SRI).  It should not be surprising to some that many SRI and faith-based funds contain a similar set of securities.  Fee-sensitive investors often avoid this area, and an opportunity exists to utilize a generic faith-based portfolio as a means to expand the base of interest in faith- or value-based investing (i.e. money talks).

 The portfolio objective is to present a transparent screening formula that allows an investor to favor investment in corporations that are typically included in a cross-section of faith-based funds, while still maintaining adherence to good investment practices such as diversification, attention to company financial stability and low investment fees.

It is assumed that investor activism will be of particular interest to those already familiar with socially responsible investing (SRI).  The proposed portfolio, therefore, filters out firms that are not included in any of the broad SRI indices.  One could look at the general SRI screening as a helpful tool to help assure relevance to members of faiths that do not have an established fund specific to their faith.

Investment Criteria

US-listed stocks that are already included on a major social responsibility index.

Company should be in top fifty common holdings of a collection of existing faith-based mutual funds.  An equal-weighted portfolio of these funds can be used to establish common holdings using commercially available tools. The following faiths already have existing mutual fund families available to them: Islam, Catholic, Evangelical Christian, Lutheran, Presbyterian, and Southern Baptist.  Fund family names associated with these faiths are: Ave Maria, Azzad, Praxis, Timothy Plan, Thrivent, New Covenant, Aquinas, Imam, Epiphany, and Guidestone.

Rank companies in descending order using a financial stability metric (e.g. Morningstar® rating, S&P credit rating).

Include between 20 and 40 stocks and equally weight the allocation.

Low Fee Implementation Options

Do-it-yourself (DIY) or DIY with some advisor assistance

Depending upon an investor's worldview, experience and access to portfolio evaluation tools, one option would be to use the stated investment criteria to construct and test a portfolio of holdings that result from following the investment criteria identified.  Portfolio back testing can be helpful in identifying the historical performance characteristics and volatility.  Investment platforms such as Folio Investing and Motif Investing have fee structures that make it practical to build a portfolio of individual stocks, and invest in fractional shares as needed, for a relatively low fee.  Discount brokerage platforms which require whole-number share purchases and have trading costs based on the number of stocks in the portfolio may require that a significant amount of investment be made to keep the investment cost in alignment with a low fee philosophy.  Advisors using the build-your-own tool available from Motif Investing may be able to provide convenient access to an established portfolio inspired by the construction process identified.

Disclaimer

This information is not intended to provide specific investment, tax or legal advice. You should consult appropriate professional help for your investing decisions.  The site sponsor may own securities that would be identified using the screening tools noted.

Any references to investment performance are historical in nature. Past performance does not guarantee future results, and all investments entail risk of loss, including the potential for loss of principal. Each investor is unique: factors including his or her investment experience, tax situation, time horizon, tolerance for risk and fluctuations in value should be weighed carefully before making an investment decision.

The views expressed are solely those of the site sponsor and do not necessarily represent the views of any organization that the author is associated with. The site sponsor does not receive any fees for mention of any source of information or service provider.