3 Awful Truths about Catholic Mutual Funds WITH BONUS!

Are Catholic Mutual Funds a Good Investment Option for the Faithful?

For years, mutual funds have been touted as a great way to invest. Buying a mutual fund provides instant diversification with good asset allocation. They are also extraordinarily simple for individual investors to manage because there’s nothing to manage other than which fund to buy and how much money to put into it. Some Catholic financial advisors recognized the need for mutual funds designed for Catholics and created Catholic mutual funds to fill that need.

While Catholic mutual funds seem like a good idea, the shortcomings inherent in mutual funds can prove disastrous for faithful Catholic investors.

1) One Size Does Not Fit All

Mutual funds, by their very nature, dictate what is and is not in the portfolio. Investors have absolutely no say in what equities should be included or excluded. For Catholics, this means you are stuck with whatever the mutual fund invests in, even if it includes companies that use slave labor, engage in gender discrimination or support contraception.

The USCCB guidelines are very specific and Catholic mutual fund managers can easily pick and choose what parts of the guidelines their funds will follow. If you, as an individual investor, want to find a mutual fund that meets all of the USCCB guidelines, you may have to settle for a fund that includes morally objectionable equities.

2) Talents Are Buried

Jesus has very harsh words for the servant who buries his talent instead of investing it, but that’s exactly what mutual funds do with a chunk of the money entrusted to them. Part of running a mutual fund involves having large sums of cash on hand to meet possible withdrawals from the fund.

When you purchase a mutual fund, expect to have a portion of your assets buried in the fund’s cash reserve. While these funds are a necessary part of a mutual fund, it flies in the face of Catholic investors who wish to put their talents to work in the market.

3) Squandered Resources

Mutual funds can have notoriously high fees. Investors often pay end up paying double to be in a mutual fund. It works like this: if you hire a financial advisor to help with your investments and that advisor turns around and buys a mutual fund for you, you are paying a fee to the advisor and a fee to fund.

On top of this fee issue, it is possible that you can be liable for taxes on gains in the fund from which you never benefited. Sounds impossible, doesn’t it? Here’s how it can happen. Over the course of a year, a fund sells stocks for a gain (and let’s assume that it only sells stocks with gains). But, by the end of the year, the value of the fund has actually declined. Even though the value of your mutual fund portfolio has fallen, you are going to have to pay taxes on the gains taken over the course of the year. Ouch!

BONUS: You Don’t Really Know What You’re Getting

Mutual funds are odd investments in that you, the investor, don’t actually know what’s in the fund without doing a lot of digging. It’s like buying a mystery gift box that’s valued at some amount, but you don’t actually know what the box contains. Yes, the valuation is correct, according to the market, but fund managers don’t often tell investors what makes up the fund. Cash? Bonds? Stocks? Which stocks? Which bonds? In what percent? Your account statement just tells you what your fund holding is worth in aggregate.

In fact, your mutual fund statements usually come as a single line item listing the total value of the fund. It’s not broken down into its constituent parts. Once a year, you will be mailed the fund’s annual report which does detail which securities it owns. But that list is out of date by the time you receive it! So, with a mutual fund, you never know, in real time, if its investments are in accord with the USCCB guidelines.

So, Are Mutual Funds Bad? Not Necessarily

Not all mutual funds are bad ways to invest. But, for committed Catholics, mutual funds present an uncertain prospect. Most importantly, it is very hard, if not impossible, to find a mutual fund that adheres to all of the USCCB guidelines, meaning you’ll most likely invest in something contrary to the Catholic faith. Failure to actually invest most funds and sub-optimal use of what funds are invested are two other major drawbacks, making mutual funds an even less attractive option. Whether you’re just starting out investing or have already added millions of dollars to your net worth, it pays to know if mutual funds really are a good option for Catholics.

Want to Start Investing But Don’t Know How?

There are only two difficult parts in investing: getting started and being patient. Many people, unfortunately, are put off by how complicated investing can be and needlessly delay their entry into the market. This can cost them thousands of real dollars in the long run.

Is There An Easy Alternative to Mutual Funds for Catholics?

We’re not here to tell you most mutual funds have problems and not offer an alternative. There are other ways to invest your money, some of which can be just as simple and straightforward as investing in a mutual fund. While mutual funds can be almost as simple to buy as shopping online, investment portfolios can offer a better option with potentially no additional steps.

Essentially, you can contact an investment advisor and have them do all the work of matching your needs to a portfolio. Then, all you’ll need to do is put money into the recommended portfolio just like you’d do with a mutual fund.

To a certain extent, an investment portfolio can be thought of like a mutual fund created exclusively for you.

After a brief conversation, just like the kind you’d have to figure out what mutual fund to buy, your investment advisor will be able to create a portfolio that suits you. Unlike a mutual fund, though, you can have absolute control over what goes in it and when you want to sell any specific part of it.

With the right financial advisor, you can get all the benefits of a mutual fund without their common problems.

As Catholics, it’s important to bear in mind that just like Catholic mutual funds exist, so do Catholic financial advisors. So you can get a personal investment portfolio that is 100% in accord with the US Conference of Catholic Bishops Investment Guidelines. But, unlike a mutual fund, you can check to see what’s in it whenever you want.

Whether you’re new to investing or not, don’t think that a mutual fund is the fastest, best way to save money. Do your homework and compare your needs with the opportunities presented by mutual funds and investment portfolios. If you need help, feel free to contact us. We are Fiduciaries and are legally required to advise our clients on the best use of their money. If we think a mutual fund would actually be the right choice for a client we must tell them that.

Whatever you do, don’t suffer from paralysis by analysis. We would rather you get started investing in a sub-optimal mutual fund (assuming it’s in line with the USSCB Guidelines) than sit on your money and lose valuable time deciding what to do.

Investing by yourself is hard. Investing with us is easy. There are three ways we can start: Have a Robot help you. Take a survey. Or just call/email us.

There are many ways to invest, ranging from the straightforward to the very complicated. Trying to create an investment portfolio that you understand and that fits your financial and moral needs is a daunting undertaking. The best way to get started investing as soon as possible is contacting a financial advisor. We’ll help guide you through the process of creating a portfolio and starting down the path to your financial freedom.

If you have any other questions about Catholic mutual funds, please contact our financial advisors for a free consultation.

Post from: Insights