You Might Be Invested in Guns Without Knowing It — Here’s How to Tell
With gun violence in the headlines on a near-daily basis, some investors are scrutinizing their portfolios in an effort to avoid supporting — even indirectly — the bottom lines of companies in the business of firearms.
Owning shares of mutual funds, index funds or ETFs, either on your own or through a retirement account like a 401(k), IRA or pension, could mean that you have at least some exposure to manufacturers or retailers that sell guns and ammunition.
If you want to take a closer look at your portfolio and change your holdings to exclude companies that make money from guns altogether, here’s what you need to know.
Are there gun stocks in your 401(k)?
“Chances are, you do have some exposure to guns in your fund portfolios,” writes Jon Hale, Morningstar’s global head of sustainability research, in a recent blog post. “For most investors, however, that exposure is almost sure to be minimal.”
There are two gun manufacturers that trade on the public market in the United States: Smith & Wesson Brands and Sturm, Ruger & Co. American Outdoor Brands, the parent company of Smith & Wesson, is also publicly traded under a separate ticker symbol. All three are considered small-cap stocks and are included in index funds that track the entire stock market. The Vanguard Total Stock Market Index Fund is an example of one of these funds — it owns 1.4 million shares of Smith & Wesson, 501,000 shares of American Outdoor Brands and 518,000 shares of Sturm, Ruger & Co.
While these companies can also turn up in small-cap-specific funds, dividend-driven funds and target date funds that include index funds, Hale says they likely aren’t material to your investment returns because they make up such a small portion of the total assets in an index fund.
A couple other companies that make ammunition — Vista Outdoor and Olin Corporation — also trade on the American stock market.
It might be more challenging if you want to exclude companies that sell guns from your investments, since one of those retailers is Walmart. Walmart is a large-cap stock in the S&P 500, which means it is a component of S&P index funds. Dick’s Sporting Goods is another publicly traded company that sell guns, although it and Walmart have stopped selling certain kinds of firearms in the wake of mass shootings over the last few years.
How to find out if you’re exposed to gun stocks
You can read the prospectus associated with any fund that you own to find out if firearm or ammunition manufacturers or retailers are part of it. You might have to dig around on your asset manager’s website to find the full document. Gunmakers and ammunition manufacturers are typically listed in the “industrials” category. Gun retailers like Walmart will be listed under a “consumer” category.
How to avoid exposure to gun stocks
It’s possible to create a portfolio that doesn’t have any exposure to gun manufacturers or retailers, but it will take a little homework.
In addition to looking through the investor information provided by funds themselves, you can also explore ESG fund options at your asset manager. ESG stands for environmental, social and governance factors, and it describes investments that meet certain criteria outside of financial returns — like whether a fund contains companies that work to combat climate change, or promote certain labor standards or diversity initiatives. Just be aware that defining and evaluating ESG principles isn't an exact science, as companies can and do characterize "responsible" investing differently.
Large asset managers like BlackRock and Vanguard offer ESG funds that exclude stocks of firearms companies, although other funds from these large asset managers may include gun-related stocks. If you’re determined to avoid any gun exposure in your portfolio, be sure to read the fine print. If your 401(k) plan doesn’t offer any options without gun exposure, you can raise the issue with your plan administrator.
And when in doubt, it’s always a good idea to talk to a financial advisor about your investment goals and how you can align your portfolio with your values.
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