A few months ago, I wrote about mutual funds that let you invest along party lines. I profiled a Democratic-leaning fund, and then a fund with Catholic values, but I hadn't found an explicitly politically conservative fund.
Then a reader introduced me to the Free Enterprise Action (FEAOX) fund. According to its website, the fund "aims to defend free enterprise from the Left's use of capitalism against capitalism."
So far, the fund sounded exactly like the sort of thing I'd avoid. But I was curious, so off I went to learn more:
- Its record isn't all that long, or great. The fund was started in 2005, and its current managers started in 2007. It has underperformed the S&P 500 so far in its short life (though this isn't really a long enough period in which to draw meaningful performance conclusions, if you ask me).
- It has a fairly steep expense ratio, at 1.82%, and a very low dividend yield, at less than 0.10%. It has no load, which is good. That expense ratio means that if you have $10,000 invested in the fund, you'll be forking over $182 as an annual administrative fee.
- According to Morningstar.com, the fund sports 444 holdings -- which is kind of an enormous number. That's almost as many as the S&P 500 contains. It suggests that the managers don't have enough confidence in their top picks to focus their money there. Just focusing on their top 100 stocks might improve their performance, I'd suspect.
- The fund's turnover is high, too, at 183%. That suggests that the managers are not holding onto their various holdings too long. Again, this suggests a lack of focus and conviction to me.
- The fund mostly holds the same stocks you'd expect to find in an index fund. Its top holdings include General Electric
(NYSE:GE), Altria (NYSE:MO), Cisco Systems (NASDAQ:CSCO), and Microsoft (NASDAQ:MSFT).
What to do
If you're looking for a fund that reflects your values, you might want to pass on this one. Funds that support your social responsibility values, instead of your political beliefs, might prove a better investment.
Shannon Zimmerman recommended one particular socially responsible mutual fund in our Champion Funds newsletter about two and a half years ago, and it's up some 36% since then, versus 25% for the S&P 500. The newsletter offers some terrific fund recommendations monthly in an easy-to-digest format. (I've found a bunch of winners there myself.) Its picks are beating the market by about 12%. A free 30-day trial will give you full access to all past issues, including detailed information on each writeup.