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BACK IN THE EARLY 1990s, Donna and I were raising a young family, buying our first home and running a small business. We didn’t have a dime in any proper investment vehicles, as there weren’t an awful lot of dimes to spare. Somewhere in the fire and smoke, I received a copy of the Sound Mind Investing Handbook by Austin Pryor.
The book was easy to read and put a number of basic investing concepts within my feeble grasp. More important, over time, it made me feel like I could win at the investing game and encouraged me to get started sooner rather than later. Subsequently, I became a fan of SoundMindInvesting.com.
SMI is geared toward people of faith, and you will see references to the value and application of stewardship throughout its material. The investment principles espoused, however, will serve a broader audience. SMI begins its approach to investing with nine principles that, while no doubt unremarkable to some, are foundational in understanding the world of investing in general and mutual funds in particular.
The SMI financial roadmap progresses through four levels of financial growth that begin with the core concepts of budgeting, debt reduction and insurance, and leads investors toward preparing for—and managing—a financially secure retirement. The guidelines offered are very comprehensive and allow users to tailor strategies to their preferred level of effort and risk tolerance.
SMI’s $99.50 annual basic membership offers a print newsletter with articles that address financial topics in each of the four levels. The newsletter provides very precise guidelines for two core investment strategies, one of low complexity and the other of moderate complexity.
“Just the Basics” uses fewer than a handful of index funds to support those just beginning to invest (the former me) and those who are too lazy for more ambitious strategies (the current me). “Fund Upgrading” adds a bit of effort, with funds traded occasionally to follow market momentum. I employed this strategy for a period and, while I will not dispute the occasional value of the effort, it eventually lost me to the simplicity of life-strategy and target-date retirement funds.
SMI’s premium membership costs $169.50 and adds web access to two more complex strategies, “Dynamic Asset Allocation” and “Sector Rotation.” As an additional key benefit, premium members receive access to MoneyGuidePro, financial planning software that would otherwise be out of reach for many investors.
If there were one thing I could change about the SMI content, it would be the amount of self-promotion in its print and online materials. While there is no outside advertising, I have seen much ink and many pixels devoted to the success of its investing strategies. It seems to me that such performance should be left to speak for itself.
Indeed, while the performance of the strategies appears to be good, it doesn’t seem quite so good when tried with real money. SMI has a series of mutual funds that follow its own investing guidelines, and the results have been mixed. For instance, the Sound Mind Investing Fund has returned 6.8% a year over the past 10 years through Feb. 28, 2018, versus 9.8% for the Wilshire 5000. One likely contributor: SMI’s funds are so-called funds-of-funds, which means they make their money investing in other funds, resulting in two layers of fees. For the Sound Mind Investing Fund, those total expenses come to 2.09%, according to the funds’ website.
I was an SMI member for many years, but now I find that the web resources I personally use do not require membership. I especially like its weekly Money Roundup article, with links to better financial writers and resources across the web. The site also has a year-end financial checklist that helps sort out key points for my annual course correction.
While I don’t have my own membership, I routinely send gift memberships to those who are just becoming aware of the investing world. Regardless of your investing preferences, SMI will offer you solid guidelines for improvement, while keeping the fleeting value of money within a larger perspective.
When not paddling, biking or shooting, Phil Dawson provides technical services for a global auto manufacturer. He, his sweetheart Donna and their four extraordinary daughters live in and around Jarrettsville, Maryland. His previous blogs include No Exit, A Most Morbid Game and Dave Ramsey. You can contact Phil via LinkedIn.
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SMI has changed significantly over the years. It started as solid financial education newsletter for the DIY investor but has moved to a high cost, market timing, actively managed financial service provider. Their returns are in the bottom half of their peers and their rating by Morningstar as of Nov 2023 is as follows:
Sound Mind fails to meet industry-standard stewardship qualities, culminating in a Below Average Parent Pillar rating.
Sound Mind open-end and exchange-traded products are costlier than similarly distributed funds at other highly-rated asset managers, on average in the highest quintile of category peers. The higher expense profile contributes negatively to the firm’s overall stewardship rating and creates a larger performance hurdle. The Sound Mind roster of open-end and exchange-traded funds has had below-average risk-adjusted performance, as evidenced by its average 10-year Morningstar Rating of 2.0 stars. A sign of strength at Sound Mind is its longest-tenured management, which offers an average asset-weighted tenure of 13 years at the firm. This accumulation of experience builds confidence that the group can navigate a variety of market environments adeptly. The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit SMI Multi-Strategy to a Morningstar Medalist Rating of Negative.