Socially Responsible Funds

Corporate America is comprised of tens of thousands of publicly-traded and privately- owned firms engaging in a myriad of activity across a vast spectrum of industries. Most of this enterprise is positive, uplifting, and responsible for not only the livelihoods of millions of Americans and, more recently, foreigners, but for the vast wealth of our nation.

Unfortunately, there are some industries that people of moral values, especially, but not exclusively Christian, have “problems” with. In fact some are barely tolerated and some abhorred, and often for good reason. In some instances, however, I feel that individuals and investment managers have a wrong perspective on some industries.

Whichever category a particular company in such an industry finds itself, investors of moral principle may rightly or wrongly seek to avoid them. This section of the website seeks to deal with these issues.

While I recommend a complete review in order of the material, you may fast forward for reference to the following sections by clicking on the topic of choice:

Or, your efforts may fall on deaf ears. You may get a polite form letter thanking you for your input which meant nothing; or a terse response telling you that they have problems with you Christians. I know of people who recently were similarly rebuffed to their surprise. But, at least you tried. Nothing ventured….nothing gained. And, you now know where they stand and that they have been confronted on the issue and are resolved to continue it. That gives you ammunition to pursue other courses of action.

If you are an investor, you should start by directing correspondence to their Investor Relations person. All of these names and contact information can generally be obtained by visiting their website. You can obtain their website via a search engine or just trying www. their name.com until you find it. Or, it is often listed on any of their products’ label.

Generally the sponsor will be more willing to listen and take action (pull sponsorship or threaten to if no changes are made) than the network which has probably factored everything in prior to catering to a specific target audience that doesn’t include you. Recently, following a poorly conceived suggestive promo on a sports program, the viewer outrage over the moral implications resulted in many sponsors pulling out, an apology, and policy change at the network.

If all else fails, tune out and make sure your children have your values and they tune out too, whether or not you are around. That’s not all that hard to do.

The role of Socially Responsible Funds (mutual funds) is to employ “screens” or “filters” in their selection of stocks in which to invest.

Routinely, investment firms already employ various “financial screens” in their stock selection. These entail the use of various company or manager-specific criteria for analyzing a company’s fundamentals and often performing technical analysis on the company and its stock price.

Without going into the whole regimen which can be quite technical, they study the company’s history, monitor their Press Releases and especially their recent statements and as they relate to prior statements. They ensure they are “fully reportable” to the regulatory agencies. They look for trends. They check volume, P/E (Price to Earnings) ratios, yield, should they be one of the roughly 15% of publicly-traded stocks that pay any dividends, and more. All this is performed on any company under consideration and by literally all investment firms (mutual funds).

But, Socially Responsible Funds initiate the screening by first scrutinizing candidates with a “moral or ethical screen” uniquely designed by that mutual fund family. If the company doesn’t “make the cut” here, why waste your time performing all the detailed financial analyses? They won’t include them in the portfolio(s) of their fund “family”.

[A “family” of funds is the name given a particular investment company. They typically offer many mutual funds within that family each, like members of a real family, with different characteristics, management style, and objectives. This “mix” is designed to offer potential investors a variety of investments to choose from]

Typically, the decision to offer Socially Responsible mutual funds starts with the formation of a new family of funds. As with others, they don’t offer one fund in which to invest. One shoe RARELY fits all.

When they incorporate, they may start small with only four or five funds, but they will offer at least those choices to investors or risk failure for they will attract very few investors who aren’t given choices and they need the economy of scale afforded by multiple funds over which to spread their considerable marketing costs.

If successful, they usually add other offerings over time. Many large mutual fund families offer 30 or more individually managed funds further subdivided into perhaps three or four classes differing in the payment of sales charges.

Socially Responsible Funds screen out companies whose products, services, or corporately owned investments constitute or support offensive or unholy activity.

Some may go so far as to focus on only those firms that go out of their way to produce their goods or services in a manner favorable to, or at least non threatening to the environment. That’s less a moral issue but is important to many.

Some go, in my opinion, way to far by screening out companies involved in producing products or providing services to our National Defense. I’m sorry, but that offends me as it does many fellow Christians. We live in a free society and enjoy the benefits of the richest nation and best government in the history of mankind, and we are under constant attack and threat by those who resent or hate us, if only for our success. Without strong national defense, we wouldn’t likely even be having this discussion, the money to invest, or the freedom to do it. Let's look at our current primary threat: Islamic extremists.

Rhetoric aside, it has been pretty well established that the greatest underlying cause of the hatred by members of certain sects of Islam is their jealousy of the system, freedom, and especially prosperity created and enjoyed in America.

The pathetic aspect of that is, if these same people turned all the energy and time they spend hating those they envy and resent (Israel and The United States, Christians and Jews) into productive time working to better themselves (Gee...there's a concept!) and change and improve their own systems, they could have much of what we have. Some could have more, given the enormous wealth in Saudi Arabia and other such oil rich nations, and their small populations.

Their attitudes speak volumes about their highly questionable “moral values and ethics” that are pretty much non-existent. It is always easier, and requires little intelligence to tear down or blow up the complicated works of more intelligent beings than it does to take the time to educate yourself, develop a work ethic, and design and create those good things for yourself and others.

It is vastly easier, for them and their fellow hate mongers, to convince themselves that America and Israel are the cause of all their problems than to go out and solve their problems that we didn’t give them to begin with.

It is infinitely more comfortable to shift blame for one’s miserable failures and condition than to “grow up” and maturely acknowledge one’s personal role and the role of one’s mentors and leaders in creating the virtual “hell” in which one might live, then to go about fixing it. That’s too much like work.

Remember, when the U.N. voted to make Israel a nation in the late 1940’s? They simultaneously offered to make Palestine a nation too. But, oh no, the Palestinians said “NO!”. They refused their own nation because they would have to allow the Jews to have a nation, too. The Jews in Israel didn’t say the Palestinians couldn’t have a nation. They were grateful to have one and they didn’t object to the Arabs who are comprised of Christians and Moslems having their nation too.

So, for all of you who, like me, had felt badly for the disenfranchised, nomad nation-less Palestinians for years, living in tent cities and all, forget it. They made the choice. Their mentors…their “leaders” chose for them. They had to have it all or nothing. Selfishness and hatefulness has left them homeless and bitter for over half a century needlessly, all because their mommies never taught them to share. Whose fault was that? It wasn’t mine. And it wasn’t yours.

When things go wrong….when a deal goes bad….when another agent “steals” your customer….when you think “Buyers and liars”….when you find yourself living in a tent in the desert eating grasshoppers and building bombs….STOP!

You are pointing your finger at someone else and affixing blame to them. Go ahead, and point your finger at them, even if you have to pretend they are there. If you are dealing with something like this now, even a domestic squabble, do it now. Ok? Doing it?

Now, keep pointing and look closely at your hand. Unless you are the victim of a terrible lawn-mowing accident or a “shop project” gone terribly wrong, you should have one finger pointing out and three fingers pointing back….at you.

I have found, more often than not, that there is roughly a 3:1 probability that the true underlying, yet often less apparent, root cause of your problem, started with you…either something you did, something you failed to do, something you goofed up, or the manner or timing in which you said or did it. Think about it.

This is especially true of sales people. In nearly every case where a sale or customer is lost, the problem gets back to either you, the salesperson, failing to ask the right questions or failing to listen to their comments or responses to those questions. You didn’t provide the level of service requested and expected. You didn’t properly qualify your buyer. You lost. They did too, but usually they recover fairly quickly….with another salesman.

And, catch this: They weren’t liars or unfaithful and the other sales person didn’t steal them. You dropped the ball and didn’t deliver on expectations. What did you expect them to do?

Now, you have a choice. Sit around with hurt feelings cursing your job and blaming everyone else for your failure and going out tomorrow and repeating the same mistakes; or do the following:

If you follow this process, you will be amazed and gain an introspective on yourself, as a professional, as a spouse, as a parent, as a church member, as a friend. For, you will likely find you played a key role in the majority of your problems. Knowing that is power, IF you put it to use.

We all make mistakes. That’s human. It’s God-like to actually learn from them so we are not condemned to go on repeating them. Most divorces result because the focus, often by both parties, but certainly by at least one, was on the outward pointing finger, and rarely on those three inbounds. Most salesmen who fail or consistently under-perform are similarly guilty. So, remember this:

I am convinced and have said for years that the single biggest problem in America is the unwillingness to accept personal responsibility for our own actions.

This failure at the individual level is why our courts are choked with litigation, our prisons filled, and our innocent unborn children killed or newborns are thrown into dumpsters. It is also why drugs and alcohol are abused. It is why 50% of our marriages end in divorce and so many schools fail to teach.

The lack of a “learning curve” is often why, when the first marriage fails, many many times so does the second, third, and fourth. Why not? Some problem never got acknowledged and if you don’t acknowledge it, you can’t fix it.

It may be easier to blame everyone else, give up, strap a bomb on, and kill yourself and the dreams you never dared to dream, and other innocent people who didn’t do a darned thing to you then it is to go to school, dream dreams of good, positive things that you could do to make your world a better place, and then get the education, apply yourself, and make a good life for you, your spouse, your children, and your nation. Be a builder not a destroyer. Yes it’s more work, but of immeasurably greater value.

It doesn’t. I’m just angry and needed to say it. (HA! Just kidding, folks. Actually it has a lot to do with some of these funds that go overboard.)

I have no problem with Christians investing in these funds as long as their definition of being “Socially Responsible” doesn’t condemn and eliminate companies engaged in helping provide for your national defense. That is a sacrilege. If you resent our national defense and won’t support it, I really prefer you get out now. There are daily flights to just about anywhere. Trust me. You’ll be back.

There are plenty of moral issues we can and should address in our investing strategies. I’ll back a bomber program to protect our nation but not a chain of abortion clinics that has taken ¾ of the number of lives lost in World War II world-wide.

My wife once got on my case for investing in a particular stock. She did so because we learned from various sources that this company, like at least one other in its industry at which one of our daughters worked while in college, had an Affirmative Action Hiring Policy for gays and lesbians. Well, I don’t like that either.

We don’t hate gays or lesbians as people. We feel what they are doing is wrong and against God’s Word. And, we don’t think it should be encouraged by employers or anyone, especially churches (not that they should be driven from the church, but the church should not change to “accommodate” sinful behavior of any type, although I know that some feel it isn’t sin. Well, convince someone else.)

Back to my point. I told my wife that, while I bought stock in the company, I did so because I felt it was a good value at its current price and that it was likely to increase substantially. BUT, you would expect that. How does that fit with Socially Responsible investing?

So, since mutual funds and pension funds (institutional investors) do buy large blocks of stock, often after-market, it is important to know which companies your mutual fund invests in for they can and do impact share price to the benefit of the Officers running the firms. This makes a case for Socially Responsible Funds

When a company goes public with an IPO or subsequently issues a secondary offering of stock from its own authorized but unissued shares the net proceeds of that offering (net of commissions paid to the marketing syndicate of stock brokers who promote the stock) go to the company treasury for the company’s benefit.

So, if a company offends you by their work, you would definitely want to avoid purchasing any such shares from new offerings, either directly or through a mutual fund that might be privy to such purchase.

I have no real problem buying small numbers of shares personally for short term profit that are out there already, in the market. The reason is that you aren’t sending Dollar One to that company or its officers who run it. You are purchasing, through a broker, shares sold to a broker by a previous owner. Those shares are sold and resold indefinitely until the company either folds, is merged, or enters into a Share Buy Back Program or reverse split.

That said, if you want to invest in Socially Responsible Funds that avoid investing in industries that either promote, utilize, engage in, or benefit from morally questionable activities, by all means do so. Some cosmetic firms, for instance, use collagen from aborted babies in their cosmetics. I think that’s heinous. It’s a billion dollar industry. That is a typical type firm that is screened by these funds. Not all cosmetic firms do this. They would pass the screen.

Tobacco smoking is one of the greatest killers in America and destroyer of health and vitality. (Not to mention its annoyance factor and the impact on non-smokers stuck breathing it). Most Socially Responsible Funds rightly screen out those firms.

Same applies to producers of alcohol for consumption. Drunk drivers kill thousands, liver failure kills tens of thousands, and millions of marriages are ruined and homes torn apart by alcohol abuse. Prohibition didn’t work, but we don’t have to support the industry. Socially Responsible Funds will typically screen them out.

My former Pastor once asked the congregation if anyone had ever “been burned by a Christian businessman.” Many hands, including my own, went up.

Now, I should differentiate between getting burned and losing while engaging their services. You get burned when someone is unscrupulous. They steal or cheat you. I could tell you stories. That’s not the same as investing with a Christian investment advisor or stock broker, and experiencing a loss in your fund or stocks. Odds are he or she tried their best but things or events intervened beyond their control and often to their shock as well as yours. That’s different. That’s life in the investment world.

When you invest, you take risk. No true investment is risk free, or it wouldn’t be an investment, no matter what you are told. If you want guarantees, go to the bank and keep your deposit below the level of protection offered by FDIC.

Also understand that, if the bank or S&L fails, your funds could be tied up, inaccessible to you, for many months. And, the CD you have in there, regardless of its rate, may go to ZERO INTEREST for the duration of the unexpired term. No recourse. It’s a provision of the insurance.

Also understand that if you put your money in the bank, you didn’t invest it. HELLO! You have a “savings account” not an investment account. And, most years your return wasn't "saved. When you net your interest for taxes and apply inflation, most years you lost money....safely.....in an insured account.

Remember this basic rule: If it pays someone interest….it’s a LOAN not an equity (stock or ownership type) investment. And, for the record for the umpteenth time in my life, you can and often will lose money in a U.S. Government Securities Mutual Fund. It’s a function of the product and the market.

No, in many cases, but not all, issues from the U.S. government itself are guaranteed not to default. Likewise, many municipal bonds are insured….against default. But, that said, most bond issuers never default. And, none of this has anything to do with market risk from interest risk.

I’ll go over that in detail in another section on bond investing. For now just know that when you purchase such a bond, literally any bond (other than U.S. savings bonds) or invest in a mutual fund comprised of any bonds, they are immediately subject to market risk from various sources including interest rate adjustments. So, if any investment advisor or bond broker or purveyor of mutual funds, or anyone at your pension fund tells you different….RUN!

He said he is often asked by members to resolve a problem for them. Let’s say their car needs fixed. “Pastor, do I take it to the experienced car dealer down the road or to my Christian friend who is fairly new to the business and works on cars part time?”

His response is: “If you really want your car fixed right, what do you think? Take it to the experienced mechanic who can fix it right the first time and hope he’s Christian. Ask him, and if he isn’t, witness to him. You might both get a benefit.”

So, in the final analysis, when selecting mutual fund investments, you need to look at the prime reason for investing. If it is the return on your investment, then look at the funds and their performance. And, don’t focus on what they just did, but get insight on how any particular fund is likely to do in today’s market, not yesterday’s. You only have the future. It’s too late to invest historically.

Then, within the framework of performance, choose the best you can within a family of funds that invests Socially Responsibly. Good luck and good investing.

That said, continue to monitor this site for a list of Socially Responsible Funds that I will endeavor to post shortly. And, thanks for caring. Invest wisely and do your part in all aspects of your life to discourage immoral activity at any level, corporate or otherwise. And remember: it begins at home…..with you and your loved ones. God Bless!