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)
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.