Oct. 7, 2002 -- Booze … cigarettes … gambling … weapons … at a time when the stock market is littered with losers, these industries are outperforming.
Some investors don't like to put their money in so-called sin stocks, like alcohol distributors. Instead, they prefer to go with companies they consider socially responsible. But when it comes to the market, sin pays.
"No matter what the economy's doing, whether it's growing, whether it's in recession, people keep drinking and smoking and gambling, no matter what," says Dan Ahrens, who has just started a new investment vehicle, called the Vice Fund.
The Vice Fund focuses on four main sectors:
Gambling: Casinos are booming despite the flagging economy.
Defense: Says Ahrens: "Somebody is always at war in this world. And they're doing it mainly with U.S.-made weapons."
Alcohol: "I think people have been drinking since the beginning of recorded time. They should do it responsibly. But it's a good industry to invest in, we think," he adds.
Tobacco: Acknowledges Ahrens: "Do I think it's good for you? No. But who am I to judge? If people are going to buy cigarettes and cigars, that's their business."
Critics Say 'The Way You Invest Matters'
But some investment advisers feel differently. Amy Domini, president of a $1.2 billion socially responsible investing fund, says there are some industries from which she simply refuses to profit.
"These are three industries that are addictive and where the victim is very often the family of the abuser, not the abuser," she argues.
Ahrens calls this type of investing "foolish." As ammunition, he uses numbers showing that over the past five years, Vice Fund stocks have gone up 53 percent, while the S&P 500 has gone up 12 percent and Domini's socially-responsible index has gone up just 5 percent.
But Domini says money should not be an investors only objective. "Socially responsible investing presumes that the way you invest matters — that the investments we make today will define the world our children will grow up in."
Ahrens counters, "If someone needs a so-called socially responsible fund so they can sleep at night, so they can feel good about themselves, then that's the right investment for them."
But he adds: "I think people should invest to make money. And when they have money, they should donate money to good causes."
Ahrens says he's not completely devoid of morals: He prints the Vice Fund prospectus — with its martini glass and cigarette logos — on recycled paper.
When he gets down to making investment decisions, however, he says, unlike gin and vermouth, morals and money do not mix.