Are There Guns in your Wallet?
Mass shootings have divided people across the board on gun related issues. Americans from the far left to the far right are all affected. Some want no controls on gun ownership, others want no guns at all. And there are no shortage of different opinions across the middle.
Not surprising. This is America.
But if you are opposed to the gun industry as a whole, you need to know if there are guns in your wallet. Because if you are both protesting assault weapons and profiting off of them in your investment portfolio at the same time, you’re supporting what you hate with your hard earned cash and that’s crazy. Protesting against assault weapons while simultaneously investing in them is financial insanity.
Are there guns in your funds?
There is a good chance that guns are in your funds if you are invested in:
- Actively managed mutual funds
- Index funds (mutual funds or ETFs)
- Pension plans
Asset managers of actively managed funds try to beat a market index by choosing stocks based upon their experience and analytics. Therefore, managers of actively managed funds have more freedom to divest from a particular stock at will. This means they can choose to exclude gun stocks. However, a phone call from you is probably not going to be enough to make them do it.
Index funds are said to be passively managed. An index fund is designed to replicate or copy an index, such as the S&P 500 Index, by purchasing all, or almost all, of the stocks in that index. An index fund manager can’t divest from a stock without creating a tracking error because the balance of stocks would be thrown off, and it would no longer track the index. Nothing can make an index fund manager exclude guns stocks from an index fund.
401(k)s, IRAs and pension plans hold a variety of both actively managed and index funds. If you have any kind of retirement plan, there is a good chance that you are invested in guns.
There are probably guns in your 401(k). – Marketwatch
What guns are in funds?
The AR15, which was used in the Parkland, Florida shooting, is manufactured by American Outdoor Brands (AOBC). Two other automatic weapons similar to the AR15 are manufactured by both Sturm Ruger (RGR) and Vista Outdoor (VSTO).
In addition to the shooting in Florida, AR15-style weapons took lives at a Texas church, an Orlando nightclub, a Connecticut elementary school and a Las Vegas concert, to name a few. Over the past 6 years, AR15-style weapons have been used in at least 11 mass shootings.
Incidentally, these same three small-cap publicly traded companies generate the most revenues from guns.
- 95% of the revenue of Sturm, Ruger & Co (RGR) is from guns.
- 68% of the revenue of American Outdoor Brands Corp (AOBC) is from guns.
- 49% of the revenue of Vista Outdoor, Inc. (VSTO) is from guns.
If you get your small-cap exposure through an index fund, you are sure to be invested in at least one of the gunmakers and probably all three. – Jon Hale, Director of Sustainability Research, Morningstar
How can I find out if there are guns in my funds?
Morningstar has put together a list of all funds holding the big three gun makers, American Outdoor Brands (AOBC) Sturm Ruger (RGR) and Vista Outdoor (VSTO). If you find any of your funds on this list, there are guns in your wallet.
Another helpful tool in evaluating whether or not a fund holds gun stocks is Goodbye Gun Stocks. The site is user friendly and tells you what gun stocks your fund holds, the percentage of guns it holds, and how much of your profit in dollars comes from guns. Be aware that the data on the site is from 2016 and has not yet been updated. Actively managed funds that were gun free 2 years ago may not be gun free today.
What are alternatives to gun funds?
The Parkland shootings in February got many asset managers’ attention. For example, BlackRock, the world’s largest asset manager, has recently created two new ETFs that are completely gun free.
BlackRock’s Gun Free ETFs
Blackrock’s iShares MSCI USA Small-Cap ESG Optimized ETF (ESML) tracks the investment results of the MSCI USA Small Cap Extended ESG Focus Index, which is composed of small-cap U.S. companies that have favorable ESG characteristics and is completely gun free.
Blackrock’s iShares ESG US Aggregate Bond ETF tracks the investment results of an index composed of U.S. dollar-denominated, investment-grade corporate bonds issued by companies that have positive ESG characteristics and is also is completely gun free.
Vanguard’s Social Index Fund
Vanguard, the world’s second largest asset manager, offers the FTSE Social Index Fund (VFTSX), which screens companies based on certain social and environmental criteria and excludes gun manufacturers. According to Morningstar, Vanguard FTSE Social Index is one of the cheapest and best-diversified U.S.-focused socially conscious funds around.
Change Finance ETF
In contrast to simply screening out guns, Change Finance ETF believes that divestment is only half the story. Not only do they screen out guns, they exclude all companies that do harm to land, air, water, and biodiversity, while including companies centered around social and environmental justice without sacrificing financial performance.
The Change Finance U.S. Large Cap Fossil Fuel Free ETF (CHGX) tracks the CHGX Index. The CHGX index tracks the Solactive US Large & Mid Cap Index, an index made up of 1,000 of the largest U.S. listed common stocks and REITs (Real Estate Investment Trusts). Then the CHGX index incorporates more than 50 different ESG criteria to exclude companies and utilities that:
- Operate in the oil, gas, coal, or tobacco industries
- Produce or process fossil fuels
- Burn fossil fuels
- Produce nuclear power, GMOs, military weapons, or pesticides
- Have a history of controversial business practice relating to human rights, labor rights, environment, or business malpractice.
- Fail to meet minimum standards related to pollution, land use and biodiversity, renewable and alternative fuels, human trafficking, health impacts of products, and management of hazardous substances
Morningstar’s list of funds that exclude guns
- Ariel Fund (ARGFX)
- Calvert Small-Cap (CSVIX)
- NuShares ESG Small-Cap ETF (NUSC)
- Pax Small Cap (PXSCX)
- Praxis Small Cap Index (MMSIX)
- Shelton Green Alpha (NEXTX)
- Trillium Small/Mid Cap (TSMDX)
- Walden Small Cap (WASOX)
- Walden SMID Cap (WASMX)
In the case of US firearms stocks, investors who want to follow their principles and avoid the sector may be taking less risk than they once feared. – Financial Times
Use your voice
Talk to your fund manager. Talk to the retirement fund representative at your company. It’s your money. You have more power than you think you do. Even if you feel that investing is too confusing for you to deal with, it doesn’t take much to say to your fund manager, “I don’t want to be invested in guns. Find alternatives.”
Take a more active role
By taking a more active role in your retirement portfolio, not only can you feel assured that your money isn’t helping industries you disapprove of, but you may also find funds that actually give you a better return while helping the world become a better place.
The bottom line
You don’t have to sacrifice financial returns to invest in companies that do good, and divest from companies that do harm to people and the planet. The socially responsible investing space is growing by leaps and bounds. If you are against support for the gun industry, you’ll want to make sure that you aren’t actually supporting it yourself.
Get woke and check your funds. Are there guns in your wallet?