Should Christians Use Faith Based Mutual Funds?

by Tim on January 12, 2011

According to the Social Investment Forum, socially responsible investing (SRI) makes up over 12% of all U.S. invested funds. SRI mutual funds screen out investments in companies that are harmful to individuals, the community or the environment. With over 250 SRI mutual funds available, it’s easy to see how popular of a choice it is for investors.

An even smaller niche of investing is called MRI – morally responsible investing. As it sounds, these investments screen out companies that support morally questionable areas like pornography, gambling, tobacco, abortion, alcohol, and anti-family entertainment. The question is – should Christians use faith-based mutual funds over other investments?

Am I Part Owner of a Questionable Company?

When you invest in a mutual fund, you are an investor in multiple (even hundreds) of companies. Owning shares of a company (through mutual funds) makes you part owner of the company and a participant in the profits and losses of that company.

For example: If you invest in a mutual fund that is a heavy supporter of the pornography industry, does that mean you are a part owner of these pornography companies. By the definition of owning stock, then yes.

Does That Mean I Need To Stop Investing in Mutual Funds?

No, of course not. Also, before I say anything more about screened mutual funds, please note that I am not suggesting that you go 100% screened.

Should you stop shopping at Wal-Mart because they sell tobacco? Not me – you’ll still see me there.

Should you stop watching ABC because Disney owns it and is a supporter of gay rights? I won’t – no way I’ll stop watching Shark Tank.

The fact is that we cannot control every situation we’re in and weed out every hint of immoral business from every transaction we make. Does that mean we should stop trying to avoid immoral investments – of course not. I don’t make donations to support abortion agencies – and with a little research, I can tell if my mutual fund investment is supportive of major abortion associations.

Are Screened Investments Right For Me?

  • If your convictions are such that investing in an unscreened mutual fund makes you cringe at what you are directly supporting, then a screened mutual fund may be appropriate for you.
  • If you are happy with the returns of the screened funds and believe in what you’re supporting (or not supporting), they might be right for you.
  • If you’re ok with the potential of higher than average mutual fund fees because of the added ‘benefit’ of screening, then you might consider making screened investments a part of your portfolio.

Will I Sacrifice Performance and Returns?

This is definitely a good question and one that might vary from fund to fund. On average, screened investments perform similarly to their non-screened counterparts. The best way to compare is to find a similarly diversified mutual fund and compare it to the performance of an index like the S&P 500.

If you are interested in finding screened mutual funds, explore a few of the most common faith-based investments available:

The Timothy Plan
Ave Maria Mutual Funds
Faith Shares
Steward Mutual Funds
Eventide Funds
MMA Praxis

The Bottom Line

I don’t have a definitive answer for every Christian out there. Your convictions might be different from mine, and you may feel that supporting a certain industry isn’t all that bad – like alcohol for example.

I’ve used screened investments and have been happy with the performance as well as knowing that my funds weren’t supporting those questionable industries. You might be different and feel that the screening option isn’t something to consider.

So what do you think? Should Christians make an effort to screen out questionable companies from their investments or is it a moot point?

Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook and subscribe to the Faith and Finance RSS feed.

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