Public Equity Investing: Finding Your Path

by John Siverling

What do Faith Driven Investors need to know about public equities?  How can our faith inform the way we invest in large companies?  

Investing in large cap companies, especially through the vehicles that most investors use (mutual funds or ETFs), feels like it is at the very opposite side of the world from owning or investing in a small business or startup.  It is pretty easy to feel like an owner when you invest $10,000 (or $100,000 or $1.0M) into your friend’s small business.  It’s not as easy when your $10,000 investment into Apple gets you 69 shares equaling about 0.0000000042% of the outstanding shares (1).  It’s almost impossible to feel like an owner when your $10,000 investment is made into a mutual fund, that itself invests in the entire large cap market.  Based on current market weighting of the S&P 500, Apple would be 6.2% of the weighted portfolio, so your share would be approximately 0.00000000026% (2).  But the reality is that $10,000 is the same, and you are an owner in each situation.

Large public companies are a big part of our economy.  Just to give some perspective, the S&P 500 is around 75% (or $35.6 trillion) of the total market capitalization of the US financial markets (3).  The 505 companies in the S&P 500 employ around 28 million people (4).  Assuming the diversity of the workforce is somewhat equal to the overall population diversity in the U.S., there are approximately 8.6 million “practicing” Christians (5) working for these 505 large public companies.  In short, there are lots of committed Christians employed by and leading these companies.   

Given the vast size of the market compared to our investments, it is only logical to ask, “How much of an impact do I even make on these companies?”  Why does it matter that I have a particular worldview when my 100 shares of Philip Morris aren’t going to change anything?  And if I can double my money through the dividends and share growth in PM, the impact of those dollars can be more meaningful.  This rationale misses the points raised earlier – you are an owner.

The reality is large public companies are highly diverse, and have activities across various geographies, industries, and customers.  The complexity of the organization’s operations and supply chains can place them in controversial places, sometimes unwittingly to the company leadership.  Within large companies, there are many committed Christian workers, at all levels of the organization.  The larger the company, the more it may look like the world around it, with people of all faiths and values.  And every one of them is part of the human condition of living in sin, but also made in God’s image.  

How then should our faith inform the way we invest in large companies?  As with all aspects of investing, it should start with the question “What are the faith values most important to you that you wouldn’t want to profit from violating them?”  Putting it another way, “What issues are most important to me and my faith?  How far am I willing to go to prevent any involvement in an issue most important to me?  What is the trade-off between avoiding all large companies, and trying to find investment professionals that can balance your Christian worldview with this sector of the investing market?”

Let me suggest there are three options when considering where and how to invest in large public companies.  First, you can avoid the entire sector because you feel every company in the large cap market is flawed or their leadership is sinful.  Second, you can simply invest in the same way as any investor would into the sector, investing into funds or ETFs that match your preferred benchmark.  Third, you can choose to be selective in how you invest in large cap companies.  That may be through direct indexing or it might be through the careful consideration of a mutual fund or ETF that aligns with your faith values.  

Option three is the approach I would suggest fits best for Christian investors.  However, in all three approaches we should be mindful to invest with humility.  There are pitfalls to our faith in each approach.  Recognize this as a journey every Christian needs to follow for themselves, and it’s a journey that never ends.  By avoiding all investments in this category, we may be more like the steward who buries the master’s money in the ground rather than investing it to increase its value.  Or we may act like a hypocritical Pharisee and see ourselves as better than others because of our behavior.  At the same time, investing in the entire market without consideration of ownership may lead to compartmentalizing your faith and rationalizing the decision.  Even if you don’t feel you can avoid certain companies or industries through your investing, are there other ways you can show through your actions that you are a Christian?  You may be in a position to engage companies and leaders of companies that you feel are proactively anti-Christian.  Or support those around you who are Christians and work within these companies.  Or support the growing number of Christian employee resource groups and help them influence those around them.    

If you decide the third option is something you’d like to explore, the great news is that there are an increasing number of investing options and resources that can help you and your advisor navigate that path.  The number of mutual funds and ETFs that are explicitly faith aligned continues to grow, allowing more choices and increasing the chance many of them will align with your faith values.  There are a growing number of more sophisticated investing solutions available, like separately managed accounts or direct indexing, that can create an investment portfolio that is customized to your personal values.  And the number of financial advisors that have experience in faith driven investing also continues to grow.  They can help guide you and your family on this journey of investing decisions, but just as importantly about the rest of your financial well-being from a Christian faith perspective.   

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(1)  Based on closing price of APPL on July 29, 2021 of $145.64, $10,000 would buy approximately 69 shares.  As of the same date, APPL had total outstanding shares of 16.53M.

(2)  Source: finasko.com/sp-500-companies-weightage/, accessed on July 30, 2021

(3)  Source: spglobal.com, accessed on July 20, 2021

(4)  Source: liberatedstocktrader.com, accessed on July 20, 2021

(5)  Source: Barna Group estimates that 31% of Americans are “practicing Christians”.