Screening the S&P 500

An Impressive and Reassuring Revelation

For Christian investors concerned about how their investments line up with their beliefs and convictions, the question inevitably arises – how would screening, with Biblical principles in mind, affect overall portfolio performance? And, aside from the effect on expected returns, would screening according to a Biblically Responsible Investing (BRI) approach impact the portfolio with additional volatility? These questions are valid considering the BRI screening process seeks to eliminate certain stocks as companies exhibit offensive behavior when compared to values Christians hold dear. To examine these questions, Stewardship Partners carefully backtested a screened S&P 500 index versus an unscreened S&P 500 over the last 12 years. The backtested results are reassuring to investors wishing to potentially align their investment decisions with their Christian beliefs.

Tale of the Tape

The chart below tracks the U.S. equity market through up and down cycles for the 12 years ending 6/30/13. Note the BRI screened portfolio not only kept pace throughout, but in the end showed better cumulative and annualized returns.

The backtest revealed another important investor benefit. The screened portfolio exhibited lower volatility as measured by standard deviation over 3, 5, 7 and 10 years, as presented in the table above. These potential benefits were measured while screening out companies for offensive activities and profit sources. The number of companies screened out of the S&P 500 during the test period ranged from a low of 39 to a more recent high of 102 (of 500).