Investments can create moral dilemmas for some

By DAVID MOON, Moon Capital Management, LLC
June 16, 2013

Last week’s column prompted a number of responses about certain types of affinity funds, particularly those that avoid “sin stocks.”

We occasionally have clients request that we not purchase morally objectionable stocks in their portfolios. Mutual fund companies realize this sentiment exists, so they create funds to appeal to those people.

These funds prey on people’s belief systems and make a mockery of the institutional investment community.

A fallacy of the “put my money where my soul is” investment philosophy is the belief that investing in a company “helps” it.

Teva Pharmaceuticals manufactures the Plan B, or morning after pill.

When you buy Teva stock, however, you aren’t sending any money to the company. You aren’t supporting abortion. Nor are you supporting women’s reproductive rights You are simply buying the stock from another private individual.

All of the land in Knox County was originally “issued” by the state of North Carolina via federal land grants in the late 1700s. When you buy a piece of real estate you aren’t “helping” North Carolina.

If you own Teva you really aren’t even profiting from its sale of its Plan B drug. Less than one-half of one percent of Teva’s revenues come from the sale of this pill. Before selling its animal health business last year, Teva sold more dog drugs than abortion pills.

It is estimated that tobacco is responsible for 410,000 preventable deaths in the US each year. Obesity accounts for 360,000.

Should a no-sin fund avoid an investment in Hershey’s? Dairy Queen is owned by Berkshire Hathaway. Should morally concerned investors shun Warren Buffett?

Ninety percent of worldwide licorice production is used in the manufacture of tobacco products. American Licorice Company produces Red Rope, Super Rope and Twistettes candies. It also sells flavoring to tobacco companies – thus contributing to both obesity and tobacco-related deaths.

Firearms account for about 31,000 US deaths each year, yet I’ve never known a self-proclaimed socially-conscious mutual fund to avoid licorice in favor of owning Sturm Ruger or Smith & Wesson.

As a kid, I was taught that both smoking and drinking were sins, only to be committed while in the privacy of one’s home, away from good church people.

My college roommate’s wedding featured a keg of beer in the church fellowship hall. I was so theologically confused that I would have been a schizophrenic socially-conscious investor.

If you want to know who a man is, look at how he spends his money and his weekends. Seeking a consistency between your investments and your morals is a laudable, yet almost quaint and unachievable goal.

Most investors’ efforts to achieve this are little more than self-delusional window dressing.

My idea of a socially responsible mutual fund is one that is competently managed and doesn’t steal from its investors, including charging them hidden or exorbitant fees.

If you invest in this type of portfolio, you may have enough money to give a little more to the charities of your choice. You may even be able to retire a bit earlier and invest more time with them, as well.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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