The investment world frequently capitalizes on emotions by creating products (funds) that cater to the latest fads or emotionally charged topic. A recent trend has been to create funds that filter companies based on political views.
A recently concocted fund demonstrates this trend precisely. The adviser ostensibly boycotts certain companies in the S&P 500 perceived to be too liberal and calls it a new fund. The fund’s very name is designed to excite and exploit political passions, irrespective of what the client might need in their portfolio. In addition, defining one company as “left-leaning” or another as being “more Conservative” is not only arbitrary in practice, but also contrary to the entire idea of diversification, and the “rational investor.” The marketing pitch captures people who believe that filtering using personal conservative ideals, beliefs, and values will yield needed market returns while investing in companies they think fit with their political beliefs. This is not likely to have the expected outcome since markets seldom behave how we want or expect them. They are encouraged to invest dollars without regard to capital market behavior or diversification. Amazingly they do claim to be ‘diversified’ and not to compromise performance without much history.
Whether “pro Right” or “pro Left”, I consider this trend more insidious than other marketing techniques because it encourages investors to use politics and emotions to select investments for a retirement portfolio. Retirement portfolio allocation shouldn’t be derailed by fads or emotions but capture gains when others react emotionally.
Edi Alvarez, CFP®
BS, BEd, MS