Having faith in your investment plan
By Jay MacDonald • Bankrate.com

Just as our currency bears the inscription, "In God We Trust," more and more Americans today are turning to the Almighty for advice on financial planning.

Call it "In God We Invest."

The philosophy behind the faith-based financial planning movement is common-sensical: Why not seek guidance in financial decisions from your higher power of choice, just as you would for other, nonfinancial aspects of your life?

Although the religious right is by far the most visible in marketing a full range of faith-based financial services, it has become increasingly common to see mutual funds tailored to the religious values of Muslims, Mennonites and Quakers.

Faith-based (sometimes called values-based) investing grew out of the socially responsible investing, or SRI, movement of the 1970s, in which typically liberal investors sought to eliminate from their portfolios companies that harmed the environment or supported the military industrial complex.

In the 1990s, the Timothy Plan mutual fund family ushered in a new faith-based era of mutual funds that screen out companies that don't square with a core set of conservative Christian values.

Faith-based funds, a small but growing subset of SRI mutual funds, often overlap with their more liberal forebears; for instance, both typically screen out alcohol, tobacco and gambling holdings.

But the more conservative Christian funds also reject companies whose products or services have even tenuous ties to pornography and abortion; who contribute to pro-abortion or sex education organizations, such as Planned Parenthood; or who offer domestic partnership benefits to gay or unmarried couples.

According to fund research firm Morningstar, assets held by faith-based funds grew from $2.4 billion, in 2000, to nearly $16 billion, in July 2006 -- more than a six-fold increase in as many years. Rapid growth indeed, but still a mere drop in the mutual fund bucket whose assets totaled $9.722 trillion in September 2006, according to industry trade group Investment Company Institute.

"Religious funds are growing, both in terms of the number of funds and the assets they have," says Morningstar mutual fund analyst David Kathman. "There are quite a variety of funds for a variety of different religions."

Christian fund choices range from the conservative Timothy Plan to Catholic-oriented funds such as the Ave Maria and LKCM Aquinas funds to more liberal faith-based funds such as the Mennonite Mutual Aid Praxis Fund.

Among the leading Muslim funds is the Amana Fund, which invests according to Islamic principles. In addition to screening out liquor, pornography and gaming holdings, Amana also avoids virtually all banks and financial companies because Islam prohibits charging or accepting interest.