There is a huge trend for investors to put their money into companies that follow a strong moral mission. For example, some physician investors will seek out the stocks of companies that have a minimal carbon footprint or donate a portion of their proceeds to charity. The idea is to achieve a profit while contributing to good works within the world. Some financial advisors caution that investing in only good-guy companies may expose you to a lack of diversification. And here is where we take a little walk on the dark side.
Sin stocks are investments in companies that can come into conflict with the Puritanical values of our country. We are not talking about unethical business practices or illegal pursuits; we are talking about the companies that cater to bad habits or bad choices that so many of us are compelled to make from time to time. According to Forbes, although there is no definitive list as to what constitutes a sin stock, or vice stock, there is a clear “I’ll know it when I see it” mentality when it comes to these bad boys of investing. A generalized idea of the types of stocks usually includes alcohol, gambling, tobacco, and weapons. Marijuana companies are also starting to be included, and some may even argue that fast food should be a part of this grouping.
For those physician investors who approach their portfolios with pragmatism, sin stocks should not be discounted. Because of their reputation, they are often undervalued but still perform well with regularity. Think about how well alcohol stocks performed during the pandemic.
For those investors who are squeamish about investing in companies that take advantage of human weaknesses and vices, take a moment to remember how much a part of our lives some of these brands are. Anheuser-Busch (alcohol), Wynn Resorts (casinos), and Pfizer (manufacturing birth control) are all considered by some to be sin stocks, and if you own mutual funds or index funds, they are probably lurking in your holdings.
When choosing stocks based on a moral compass, or an amoral compass, it is important to remember that the same tried and true methods of smart investing apply. Be informed. Be rational. Be diversified. And take guidance from an experienced professional.