Friday, August 5, 2011

Amana Growth Fund

It's time for Portfolio Pick number two.  I present you with a growth fund that invests in large companies.  This fund is not like the other large growth funds on the market, however.  I am talking about the Amana Growth Fund (AMAGX).

Performance of the Amana Growth Fund (in blue) vs. the S&P 500 Index (in green) and the Dow Jones Industrial Average (in red).  Graph captured from Yahoo! Finance (8/5/2011).

So how is this fund different?  It takes an Islamic approach to investing: stocks are o.k., bonds are not.  Any portion of AMAGX's assets not invested in stocks remains in non-interest bearing cash.

Not all stocks qualify, either.  Any company that does not adhere to the principles of Sharia law are also excluded.  Examples include:
  • Banks - no JPMorgan Chase (JPM) here
  • Adult Entertainment - New Frontier Media (NOOF) not allowed
  • Liquor - forget Brown-Forman (BF.A/B)
  • Gambling - Ameristar Casinos (ASCA) is out
  • Pork Processing - sorry Hormel (HRL)
Despite leaving these types of companies out, this fund does pretty darn well.  Notice that graph above?  AMAGX has been consistently beating the 500 and the Dow since around 2004.  Morningstar gives the fund five stars.

Getting into this fund requires a minimum investment of $250 ($100 for IRA's).  The minimum must be met head-on; there are no waivers for an automatic plan.  Once enrolled, subsequent purchases may be made for $25/month.  Although you can't open an account online, the necessary forms are available at Amana's website (the applications and prospectus can be found here).

How I Would Invest:  Not much to say here.  If I didn't have the minimum funds required, I would sock away the money in a savings account until I did.  I would then sign up for the automatic investment plan, and reinvest the dividends and capital gains.

This is not a recommendation to buy.  It's up to you whether you should own this Portfolio Pick or not.  Consult a financial expert if you need to.  I currently do not own any shares of this fund.  I am also not a Muslim.

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