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Faith-Based Investing for Retail Investors


When it comes to faith-based investing, much of the attention tends to highlight actions by institutions. But a growing number of retail investors are also focusing on faith-based mutual funds and other vehicles that align with their beliefs. While the faith-based investing world totals less than $28 billion, according to InvestmentNews, assets in faith-based strategies have grown 33% over the past five years and can be found in all asset classes and industries.

Faith-Based Investor Priorities

Of course, there is no one-size-fits-all solution for individuals who want to apply their religious beliefs to investment decisions. Still, many faith-based investors share a common denominator: they avoid companies and industries that conflict with their religious teachings and embrace those in alignment with their teachings.

For example, some Christian investors avoid companies connected to alcohol, tobacco, gambling, pornography, and arms manufacturing. Islamic and Shariʽa-compliant investments may screen out similar areas, along with companies that process pork products or profit from interest. As for positive screening, some Jewish investors may opt for investments in Israeli startups, or those that facilitate peace between Israel and Palestine.

Like other values-driven investors, faith-based investors may expect a range of returns, from those who seek market-rate earnings to those who are willing to concede some returns in order to harmonize their portfolio with their religion. As one Creighton University professor of finance told US News, faith-based investors should not “expect that [they] will systematically outperform or underperform the broad market.”

Many faith-based investors avoid companies and industries that conflict with their religious teachings, while embracing those in alignment.

Faith-Based Funds

While faith-based institutional investors may have more weight in shareholder engagement because of their larger portfolios, individual or retail investors can make impact with their investments, too.

Depending on their needs, individual investors can identify socially responsible funds or other investments that align with their beliefs. For example, following the Torah’s emphasis on preserving natural resources, Jewish investors might seek out opportunities in renewable energy. Others may prefer to research designated faith-based mutual funds and exchange-traded funds, which are likely to screen out enterprises that violate a given religion’s values. Overall, nearly 150 faith-based funds exist across 38 fund categories, InvestmentNews reports.

For guidance, some individual investors may engage a broker with special expertise in faith-based investing, while others may turn to digital platforms and investment apps tailored to their values.

Want to learn more about faith-based investing? Read:

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