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Vegan Portfolio Overview

You’ve already decided that an ethical lifestyle doesn’t end with recycling, voting or the food that you eat. But understanding how to integrate those values into your investments can feel like an overwhelming challenge. Whether you are unsure of how to invest cruelty free, or simply haven’t given it much thought, many vegans have investments that unknowingly go against their values. At Demand Wealth our ‘Demand Vegan’ portfolio serves as an animal cruelty free solution that aligns with your lifestyle, beliefs and goals, without necessarily sacrificing returns.

What is Vegan Investing?

Most vegans are pros at picking apart every meal to determine whether each ingredient is vegan-friendly. To a vegan, a sauce isn’t just a sauce – it could be a sauce with meat and dairy products. This is the same approach that Demand Wealth takes in vegan investing. If you have money in a 401k (retirement plan), it isn’t merely in a faceless account, but is rather going to real people supporting real time business decisions. Vegan investing, at its core, is about analyzing each investment to ensure you are minimizing the amount of money invested in companies exploiting animals.

The typical 401k retirement account has 36% of funds invested in companies engaged in the exploitation of animals1. If $36,000 of your $100,000 portfolio is going to companies that go against your personal values would you want to make a change?

The Solution

The Demand Wealth Vegan Portfolio
The ‘Demand Vegan’ portfolio screens out companies engaged in the exploitation of animals, based on the evaluation criteria laid out by Cruelty-Free Investing. A company fails Cruelty-Free’s screen (and is excluded from the portfolio) if they do any of the following:

         1. Manufacture or serve food or beverages  containing animal products
         2. Manufacture or sell clothing that involves killing or harming animals
         3. Manufacture or sell products that use animals for experiments
         4. Breed animals for food production and/or animal testing

If a company doesn’t violate these screens, then they are considered cruelty-free and are eligible. Our portfolio includes hundreds of companies that don’t exploit animals.

The issue that vegan investors are currently facing is the lack of options in a risk customized portfolio. While there are thousands of animal-friendly companies, there are a limited number of funds available that screen by these principles. Maintaining a well-diversified portfolio that completely aligns with a vegan lifestyle (with custom risk options) is extremely difficult to do at a low cost. That’s why we set out to provide vegans with a comprehensive investment option: The ‘Demand Vegan’ Portfolio.

The ‘Demand Vegan’ Portfolio only contains funds that are cruelty-free without exception. This portfolio only holds cruelty-free stocks and government-issued securities and gold, which do not violate the vegan screens. Due to the strict ethical screens of the portfolio, there are slight diversification limitations. While there are over 250 stocks in ‘Demand Vegan,’ it does not contain International, Real Estate, or small cap exposure due to the lack of a quality screening source. For a more broadly diversified ESG2 (Ethical, Social, Governance) option, please review our ‘Demand Green’ portfolio.

Investment Selection

While researching a company’s involvement in animal exploitation is our top priority, making sure that your investments are globally diversified and properly aligned are also of paramount importance. Based on the results of your risk tolerance questionnaire, the appropriate allocation from 10 risk models within the ‘Demand Vegan’ portfolio will be recommended. For example, a moderately conservative investor will have a portfolio containing mostly bonds with light exposure to stocks, such as the ‘Demand Vegan’ 20/80 (20% Stocks/80% Bonds). The opposite end of the spectrum holds true for someone more aggressive, where a 70/30 or 80/20 allocation containing mostly stocks and fewer bonds is more appropriate. Low fees, solid managers, low tracking error and high Sharpe Ratios are also factored in.

Low Expense Ratios
As you know, past performance of an investment does not indicatefuture performance. There is significant uncertainty in the investment world, but through that uncertainty, there is one constant: fees. Every fund has an expense ratio: this is the fee that a manager collects for managing each fund and is expressed as a percentage of the money that you have invested. The average expense ratio for Vegan funds is 0.60%.3 While this may seem negligible, if your nest egg grows to $100,000, you end up paying $600 per year.

That’s why we choose funds with lower expense ratios. On average, our ‘Demand Vegan’ portfolios have an expense ratio of
0.35%, so less of your money is going to managers and more of it is staying invested.

Reputable Managers
Even though past performance can’t predict future returns, fund managers can serve as a clue to a fund’s quality. We sort through thousands of funds, and carefully select those with reputable managers.

Low Tracking Error
While Demand Wealth provides an actively managed overlay, most of the funds included in our portfolios are “Passive Funds”.  Passive funds that follow an index, such as the S&P 500, generally have lower expense ratios and have historically outperformed actively managed funds.  However, some passive funds track their underlying index more closely than others.  The further away passive funds get from tracking the index, the more likely they are to deviate from that index.  We account for this by selecting funds that historically have low tracking errors.

High Sharpe Ratio
Imagine you are deciding between two different funds: Fund A and Fund B. One has an expected return of 10%, while the other has an expected return of 7%. At first glance, Fund A would seem to be the much better option. However, if Fund A took on significantly more risk than Fund B, then Fund B could have a better risk-adjusted return. That’s why it’s so important to consider risk as well return when looking at investment options.

The Sharpe Ratio gives insight into this characteristic. An investment’s Sharpe Ratio helps quantify how much return you’re getting compared to the amount of risk that you’re taking. Our portfolios are managed to contain funds that have yielded solid returns while taking on less relative risk.

Portfolio Management Strategies

Your Portfolio is continually being monitored by our team of financial professionals, and we are constantly looking for opportunities to optimize your portfolio via Tax Loss Harvesting and Rebalancing strategies.

Tax Loss Harvesting
If you have a taxable account with multiple holdings, chances are there will be some down positions in any given year, even if your total portfolio is net positive. Tax loss harvesting is the process of selling investments at losses, which can provide a tax deduction (for 2020 up to a -$3000/ year loss can be written off against your annual income).
Annually we will analyze the positons in your non-retirement accounts then sell the appropriate losses and repurchase them after the 31 day wash sale rule has been satisfied.  During this interim period, those funds will be invested in a placeholder similar to the sold position, so your money stays comparably invested.

Rebalancing
Portfolio rebalancing is a staple of effective investment management. Demand Wealth sets your portfolio to an optimal allocation of stocks, bonds and real estate. This allocation will change over time as market conditions and investment performance evolve. Rebalancing is the discipline of resetting your portfolio back to its original optimal  allocation. For example, if a 50% stock/50% bond portfolio evolves to be 57% stocks/43% bonds after a period of time. Rebalancing involves selling enough stocks and buying enough bonds to reset your portfolio back to its appropriate 50%/50% allocation. Of course, as your financial situation changes, Demand Wealth works to ensure that your portfolio stays properly diversified, optimized and in sync with your financial goals.

The Demand Wealth rebalancing process is performed by our skilled team. Unlike many of the robo-strategies, which rebalance at a defined interval (e.g. +/-10%), a Demand Wealth portfolio manager rebalances when it makes optimal sense. We also incorporate macroeconomic factors which may evolve over years, rather than months, that current computing models simply aren’t able to perform.

Demand More from your investments, planningand advice. Open a ‘Demand Vegan’ portfolio with us today.

1. Data taken from crueltyfreeinvesting.org

2. Environmental, Social, and Governance [ESG] criteria are a set of standards for a company’s operations that socially concious investors use to screen potential investments.

3. The average expense ratio for all funds offered by Beyond Advisors, the only Vegan ETF Provider