Your Guide to Faith-Based Investments
According to Gallup, almost 80% of Americans are religious, and 37% can be classified as “highly religious.” We’re the most pious developed country in the world.
With that in mind, it shouldn’t be surprising that faith-based investments — especially funds that comply with Christian, Jewish, or Muslim codes of morality — are a big business.
There are more than 40 faith-based investment funds on the market today, representing a wide variety of religious perspectives, and hundreds of billions of dollars of assets are under faith-based management.
Like all funds, faith-based funds vary in their strategy, fees, and performance. Some are great moneymakers in addition to being religiously sound. Some aren’t.
Today, we’re looking at some of the most popular and successful exchange-traded funds (ETFs) catering to the three largest religions in this country: Christianity, Judaism, and Islam.
There isn’t a universally accepted definition of what constitutes “Christian investing.” But in recent years, some ETF issuers have launched funds that cater to traditional Christian ideas of morality.
The stock selection process in Christian ETFs generally involves screening against industries that are seen as un-Christian in some way, such as gambling, pornography, and guns.
The Global X S&P 500 Catholic Values ETF (NASDAQ: CATH) invests in companies within the S&P 500 THAT comply with the Socially Responsible Investment Guidelines published by the United States Conference of Catholic Bishops (USCCB). It excludes companies that do not.
Inspire Investing also maintains the Inspire Small/Mid Cap Impact ETF (NYSE: ISMD), the Global Hope Large Cap ETF (NYSE: BLES), the mega-cap-focused Inspire 100 ETF (NYSE: BIBL), and the Inspire Corporate Bond Impact ETF (NYSE: IBD), four ETFs that reflect the issuer’s socially conservative Christian values.
Inspire’s selection process has been a source of controversy, as it includes stocks involved in defense and weaponry and excludes major technology companies like Apple (NASDAQ: AAPL) and Alphabet (NASDAQ: GOOG) for their support of the LGBT acceptance movement.
All four of the Christian equity funds discussed above are beating the Dow this year, while the bond fund has traded almost flat.
Islamic Sharia-Compliant Funds
Islam has more explicit rules about what its adherents are allowed to invest in.
Sharia (Islamic religious law) forbids Muslims from receiving interest from loans. It also discourages them from investing in companies that sell religiously forbidden goods such as alcohol, pork, and pornography.
To avoid running afoul of these restrictions, Muslims have developed an extensive system of Sharia-compliant financial institutions — including the Amana Mutual Funds Trust, an issuer of U.S.-listed, Sharia-compliant ETFs.
Amana offers the Amana Growth Fund (NASDAQ: AMAGX), the Amana Income Fund (NASDAQ: AMANX), the Amana Developing World Fund (NASDAQ: AMDWX), and the Amana Participation Fund (NASDAQ: AMAPX). The latter invests in special Sharia-compliant fixed income securities, as Sharia prohibits the purchase of most conventional interest-bearing bonds.
The growth fund has handily beaten the Dow so far this year. The income fund has roughly kept pace with it, the developing world fund has underperformed, and the fixed-income fund has traded more or less flat.
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Investing with Jewish Halacha in Mind
Judaism, like Islam, has an extensive system of religious laws (Halacha). But it’s less explicit than Islamic Sharia when it comes to financial topics.
Nonetheless, in recent years some Orthodox rabbis such as Asher Weiss have opined that it is problematic for Jews to invest in companies that engage in religiously prohibited activities like operating on Saturdays, selling leavened bread during Passover, or selling pork at any time.
There are no U.S.-listed ETFs that completely follow this strict interpretation of Jewish financial Halacha (though there are several such funds listed in Israel).
U.S. investors who want to keep Halacha in mind might prefer to invest in U.S.-listed Israeli ETFs, as some companies in the Jewish state limit their operations during Saturdays and holidays.
The VanEck Vectors Israel ETF (NYSE: ISRA) and the iShares MSCI Israel Capped ETF (NYSE: EIS) have both had decent runs so far this year. The VanEck ETF has outperformed the Dow, while the iShares ETF is a few tenths of a percent below it for the year.
Another Approach to Values-Based Investing
Here at Wealth Daily, we write from a secular perspective on wealth management, but we understand that many investors want their holdings to match their values.
That’s why veteran investment consultant Jeff Siegel launched Green Chip Stocks. This market-beating newsletter helps investors do good while doing well by finding innovative, undervalued companies that are working hard to improve our planet and our society. Click here to learn more.
Until next time,
Samuel Taube brings years of experience researching ETFs, cryptocurrencies, muni bonds, value stocks, and more to Wealth Daily. He has been writing for investment newsletters since 2013 and has penned articles accurately predicting financial market reactions to Brexit, the election of Donald Trump, and more. Samuel holds a degree in economics from the University of Maryland, and his investment approach focuses on finding undervalued assets at every point in the business cycle and then reaping big returns when they recover. To learn more about Samuel, click here.
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