Perhaps you’ve recently wondered if your money is in gun stocks, and if you can or should take it out. Warning: The answer is complicated.
an investor in the major gunmakers.
An analysis by the nonprofit advocacy group Goodbye Gun Stocks found that 35 percent of U.S. stock mutual funds contain investments in a maker or retailer of guns and ammunition.
Concerned investors can also ask their financial advisor for a breakdown of exactly where their money is flowing.
Rick Rodgers, director at Innovest Portfolio Solutions, says investors often assume their financial advisors have screened investments for certain companies the investor might find problematic, when in fact they haven’t. Better communication is needed, he said.
“Describe what you wish not to invest in,” Rodgers said. “Have the advisor present evidence that they’ve done the screening.”
Yet experts say divestment isn’t necessarily the best route if, say, you would like to see more gun controls put in place.
Jamie Cox of Harris Financial Group, which manages $ 500 million for about 800 middle-class families, recommends what might seem a counter-intuitive approach: Don’t sell your shares.
“You’re better to band together and become a bigger fraction of ownership,” Cox said.
He pointed to recent news that BlackRock, the world’s largest asset manager and one of the biggest shareholders of gunmakers, announced on Thursday it will speak to gunmakers about society’s expectations as mass shootings have become disturbingly common.
“If they’re managing money on behalf of millions of Americans and they accumulate a large position in company X, they can influence decision making within the corporation,” Cox said.
He added, “Just because you sell the stock doesn’t mean the company doesn’t continue to operate. The better way is to come up with rules.”
Ian Lanoff, a Washington, D.C.-based lawyer who advises state pension funds on their fiduciary responsibilities, said the divestment of pension funds in the tobacco industry 15 years ago had little impact.
“I didn’t see any evidence that tobacco companies cared at all,” Lanoff said “I’ve heard investment experts say to my boards, other people will just buy the stock if you sell it.”
For investors looking at retirement accounts, divestment may leave them with few (or no) options. Many index funds that track the market don’t leave room for specification. And your company might not provide a 401(k) option that is “gun-free.”
Rather than focus on weeding out certain companies, experts say it can be easier to focus on finding businesses you support via so-called ESG investing — which looks for companies with good track records on environmental, social and governance factors. This opens up more possibilities.
“ESG funds most likely won’t own stocks in gun manufacturers and defense contractors,” said Aaron Pottichen, president of retirement services for CLS Partners in Austin, who has seen more clients looking for such investments.
Indeed, investors now consider “environmental,” “social” and “governance” factors across $ 8.72 trillion in professionally managed assets — a 33 percent climb from 2014. Rodgers said his research shows that 60 percent of millennials want their investments screened for these factors, compared with just 29 percent of baby boomers.
You can check if your company offers the option for you to self-direct your 401(k) account into an ESG fund. If so, you can veer away form the standard options and move, “into the wild west with hundreds of investment options available to you.”
The downside, Pottichen said, is that you could be taking more risks since you’re not in an investing plan endorsed by the company.
If you can’t self-direct your account, and none of the 401(k) choices are “gun-free,” Rodgers recommends people go to their human resources department and ask who oversees the retirement accounts.
Sometimes it will be an investment committee, and sometimes it will be just one person. Either way, you can ask for them to provide a socially responsible investing option. Usually when a company adds such an option, Rodgers said, it’s because employees have requested it.