Whether therefore you eat, or drink, or whatsoever you do, do all to the
glory of God.
- I Corinthians 10:31

Frequently Asked Questions

7. Why not own a mutual fund?

Well-chosen mutual funds are often better for small investors. Mutual funds are:

  • Professional – they provide active management
  • Liquid – they facilitate withdrawals while maintaining diversification, since fund shares can be sold usually without any cost
  • Service-oriented – they provide good investment services by phone, email and website

Most Christians face two key issues in choosing between an SMA (separately managed account) and a mutual fund:

  • Availability / Values/ Performance – only a few mutual funds incorporate biblical values and performance records are mixed
  • Size – minimum fees imply that a small SMA is from $100,000 to $250,000 at many firms. Asset-based fees often exceed 300 basis points for assets below $100,000
  • Cost – mutual fund investment management fees are generally fixed, while other fees generally decline as the account size increases, as follows:
    1. Mutual funds have two main costs: (1) investment management – the range for this fixed fee is roughly 75-150 bps (about 130 bps is the average), and (2) investment advisory – this fee generally declines for larger accounts, the fee range is 50-100 bps, an investment advisor helps select the mutual fund and oversee the mutual fund managers;
    2. SMAs have three main costs, as noted in the prior FAQ What is the SMA cost?: (1) investment advisory fee – 50-100 bps, (2) back offices services fee – 25-125 bps, and (3) investment management fee – 35-75 bps; these fees generally decline for larger accounts and for accounts over about $200,000 are less than the mutual fund fees when an investment or financial advisor is used.

Many Christians choose a mutual fund for accounts with assets below $100,000 (and sometimes below $50,000). Depending on availability, values, and performance considerations, accounts over $100,000 are more likely to use SMAs.

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