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Several weeks after the mass shooting at Marjory Stoneman Douglas High School in Florida, financial advisor Ed Snyder got an email.
A client had searched Goodbye Gun Stocks, an online database, to see if any of her investment funds included gun manufacturing companies. One of them did.
The client had divested from such stocks several years earlier and she was upset to learn that a more recent investment had allowed a particular stock back into her portfolio. Snyder, president of Oaktree Financial Advisors in Carmel, Indiana, discovered the root cause was a small-cap fund. He apologized and swapped the fund for a similar investment that did not contain the manufacturer’s stock. The experience was unfortunate, but the client thanked Snyder for his quick work.
Many investors across the country have recently discovered they own stock in gun companies — most often via small-cap index funds. Often, like Snyder’s client, they have no idea. But people who own shares of small-cap index or mutual funds and total-market funds will often own a slice of a firearms company, according to a recent Morningstar analysis.
For most index and mutual fund investors, “these holdings are small,” says Snyder, “but they still matter to people.”
And while finding a small-cap or total-market fund without gun manufacturers is relatively simple, some investors want to go even further by avoiding retailers, payment companies and other organizations with ties to the gun industry. What they’ve found is that aligning their investments with their values often requires detailed knowledge of a fund’s holdings.
Indeed, Citigroup announced on Thursday that it is setting restrictions on gun sales by its business customers. The banking giant will forbid the sale of firearms to customers that have not passed a background check and those that are under the age of 21. Citi is also banning the sale of bump stocks and high-capacity magazines.
The backlash against gun stocks illustrates a pain point for investors who may feel disconnected from, or...