weekly word – 5/19/22

Mutual Funds and Vice Stocks

As a boy, when my family wanted to watch a new movie, my dad would go to the local video rental store. But there was always an area I couldn't go, the "adult" video section. It was blocked off by a curtain of shame. That curtain made sure that no one had to see all the depraved video covers unless they wanted to go in. 

Sometimes society naturally protects us from sin. 

But in the investing world, there is no curtain of shame.

Let's say you inherited five million dollars today. You go to your financial advisor, Pete. You tell Pete the good news. After giving you a high-five, he advises you to invest in some mutual funds. "They're a safe place for your money," he tells you. 

He introduces you to one the oldest, largest, and most widely held funds of all time, the Vanguard Total Stock Market Index Fund (ticker: VTSAX). He explains that this fund will buy you a small part of 4,124 different businesses, all of which are well-run and will likely do well over the next ten years.

As he explains, he hands you a packet of information about the fund, called a prospectus. Out of curiosity, you look through all the thousands of companies in that fund. 

Looking through it, you realize something shocking: if you buy VTSAX, you would become part owner of a gambling company (stock ticker: LVS), a chain of adult nightclubs (RICK), and Playboy magazine (PLBY)! How did this happen? You thought your advisor Pete was a trustworthy guy! How could he advise you to be unequally yoked with these depraved institutions?

The problem isn't Pete. Pete's job is to make you money. The larger company he works for makes financial products and Pete has to offer them to his customers.

Reputable financial institutions like Charles Schwab, Vanguard, and Edward Jones don't operate like my dad's old video rental store did. There is no curtain of shame in mutual funds. Today's financial advisors channel customers' money into "adult" investments indiscriminately. They are called "vice stocks". This provides an easy way for Christians to unknowingly own and profit from the business of depravity. 

But they don't tell you that directly. They lump these companies into groups with harmless names. Online pornography counts as "tech" stocks. Abortion companies are labelled as "pharmaceutical" or "healthcare" stocks.  Gambling companies are rebranded as "hospitality" stocks.

How can Christians avoid partnering in these kinds of companies?

When we invest, the first question we should ask is, "Whose money is it?" It's God's. So He, must determine the criteria for how to invest it. These are His criteria:

1. Don't profit by sinning. "Treasures gained by wickedness do not profit, but righteousness delivers from death." (Proverbs 10:2) 

Sin is everywhere, but not every company is a Playboy, a strip club, or a casino. Some companies produce essential goods and services that we depend on, like farms, grocery stores, and construction companies. Not every company is Christian. No secular company is perfect. But there are thousands of non-Christian, imperfect, secular companies that perform functions that are harmonious with God's design. They do a good job of providing the goods and services that people need.

2. Don't profit from oppression. "He who oppresses the poor to make more for himself or who gives to the rich will only come to lack." (Proverbs 22:16; see also Prov 14:31) 

Some very successful companies depend on the Chinese government's subjugation of millions of Uyghurs to perform forced labor  (https://tinyurl.com/yn2u9rhn). Other companies, at great cost to their bottom line, have done their due diligence to avoid this. When you buy stock, you are an owner. If you own a business that oppresses people, you are encouraging that oppression whether you know it or not. To take God's money and invest it in oppression dishonors him. Better to leave it in a safe until you find a decent alternative!

3. Don't be greedy to make a quick buck. "So are the paths of everyone who is greedy for gain; it takes away the life of its possessors." (Proverbs 1:19) 

Don't give in to the temptation to ignore God's criteria. Why sacrifice your integrity for a higher return on investment? God rewards those who manage their money according to His word. God also punishes those who invest solely based on greed.

4. Pay attention to how you invest. "Be fully aware of the condition of your flock, and pay close attention to your herds. Wealth is not forever. Nor does a crown last from one generation to the next." (Proverbs 27:23-24) 

The common factor is that God expects us to actively, not passively, steward His money. He entrusted His flock and herds to you, not to your financial advisor or the Vanguard Group. Because He entrusted His resources to you, He holds you individually responsible for how you manage it. Christians must not be passive in areas of life where God expects them to be responsible.

Now some Christians have the time and ability to investigate their investments using this criteria, weeding out funds containing companies based on sin. Unfortunately, many Christians have work-related retirement funds with limited options. If this is the case, some will have to choose between bad and worse funds. 

Other Christians would benefit from companies such as The Timothy Plan. This company creates mutual funds that filter out companies who qualify as "vice stocks". If you are interested, you can learn more about them at www.timothyplan.com. No mutual fund can promise that your investments make 10% gains every year; but these funds can help you stay away from owning a business centered on depravity. 

A word of caution: most financial advisors aren't discerning about vice stocks in the mutual funds they recommend. Sadly, I have known several Christian financial advisors who simply don't care about this. They provide no curtain of shame to their Christian customers to guard them from vice stocks.

One day, each of us will give an account to God about how we managed His resources on earth. Each Christian has a conscience being informed by His word and being sanctified by His Spirit to interpret and apply His word. Let's make sure our investments honor His will.

Pastor David