Get the Guns Out of Your Portfolio

500 Words on Thursday | Written by Lee Schneider 

People have the right to bear arms, but I don’t want guns in my stock portfolio, particularly in the 529 college savings plan that I am starting for my youngest son.

Why should we fund his college education with profits from gun makers like Smith & Wesson?

From a financial perspective, it makes a lot of sense to invest in Smith & Wesson (returning 16% over the last decade), Kraft Foods (highly-profitable maker of addictive crap that is killing us), Philip Morris (selling cigarettes to kids overseas; highly profitable) and Chevon (nice-talking oil company that is still killing the planet while providing solid returns to investors.) Strum, Ruger & Company, a gun maker located just a short car ride away from the Newton school shootings, returned 48.5% to investors over the past year.

In the world of investments big returns are good. It shouldn’t matter how you make a killing in the market, right?  Well, I think it no longer makes sense to fund a child’s education by investing in companies that profit by killing.

When I was little, my grandmother bought me stock in McDonnell Douglas. They made aircraft used by travelers and also fighter aircraft and weapons systems. It made sense to grandma because the company was profitable, the memory of WWII was strong and defeating Hitler using deadly technology was how to survive. But years later, after the rein of Bush I and Bush II, and when I became old enough to figure out that governments fund defense contractors for profits and not much for peacemaking, I sold the stock. (At a profit!) Then I started to look for alternatives.

In the early 1990s I called brokers and asked, ‘Hey, do you have any stock funds that don’t invest in oil companies or companies that make weapons?’

‘No,’ was the response, usually followed by the sound of somebody who wanted to get me off the phone as quickly as possible. (‘Can I put you on hold for, like, a decade?’)

But now, quite a few years later, things are better. When I ask the same question, the broker says, ‘You know, we’ve been getting a lot of requests for that.’ There are mutual funds that exclude gun makers, tobacco, gambling and even alcohol from their portfolios. But lots of them still invest in oil companies (those profits are hard to resist for fund managers) and it’s been challenging to find a 529 I believe in that doesn’t fund killing the planet, or is tempted by drug company profits. Dammit, my kid might smoke pot and drink booze all through college, but his education will not be funded by a drug company! (Insert laughter here).

You can see what a moral minefield this is, but I am going there anyway. Domini Social Investments doesn’t include weapons makers in its funds, but they don’t have a 529 for college savings. Pax has funds that promote peace and stay away from violence, but no 529. Some good news at Calvert, which has managed  the DC College Savings Plan since 2002 and will do so at least until July 2013, when the management relationship will be reviewed.

Hello, fund managers? There’s a big market of new parents waiting for you.

Photo credit: Tax Credits via Creative Commons license.