iQ 40 Days (BRI) All Cap Model
INVESTMENT OBJECTIVE
The iQ 40 Days BRI All Cap Model seeks to provide returns in excess of index benchmarks by investing in companies that are not involved with activities deemed as "non-biblical".
INVESTMENT PROCESS
The iQ 40 Days BRI All Cap Model implements the following rules-based process:
Begin with a starting universe of stocks that are held by faith-based '40 Act funds and are members of the S&P 1500 Index
Sort the starting universe by the Amihud Liquidity Ratio* and select the top ten.
The Model continues to hold the ten stocks until one drops out of the top 20.
This model reconstitutes every February, May, August and November and averages less than one position change every reconstitution.
Why This Process Works
An all-cap rules-based investment model that incorporates the Amihud ratio can outperform over the long haul due to several reasons. Firstly, the Amihud ratio measures the illiquidity of a stock, helping investors identify stocks that may be undervalued due to liquidity concerns. By incorporating this ratio into the investment model, it can help avoid stocks with poor liquidity, reducing the risk of price manipulation and potential losses.
Secondly, an all-cap approach allows for diversification across different market capitalizations, providing exposure to both large-cap stability and small-cap growth potential. This diversification helps mitigate risks associated with investing in a single market segment and can enhance overall portfolio performance.
Additionally, a rules-based approach eliminates emotional bias and subjective decision-making from the investment process. By adhering to predefined rules based on quantitative factors like the Amihud ratio, the model can maintain discipline and consistency with a higher liklihood for better long-term results.
Overall, integrating the Amihud ratio into an all-cap rules-based investment model enhances risk management, diversification, and consistency, thereby contributing to potential outperformance over the long term.
A quick word about the Amihud Liquidity Ratio
The Amihud liquidity ratio is a proxy that quantifies how well a stock can absorb trading volumes without the price moving and has been proven to have a strong relation with expected stock return
What is “Biblically Responsible Investing?
Biblically Responsible Investing (BRI) is an investment strategy that aims to align an investor's values with their investments by selecting companies that meet certain moral or ethical standards based on Biblical principles. Here are some potential benefits of BRI:
1. Aligns with personal values: BRI allows investors to invest in a way that aligns with their personal values and beliefs, which can bring a sense of fulfillment and satisfaction.
2. Potential for long-term performance: Some studies have shown that companies that are socially responsible and align with BRI principles can perform well financially in the long term. This may be due to factors such as increased customer loyalty and employee satisfaction.
3. Reduces exposure to controversial industries: BRI investors can avoid investing in companies that engage in controversial practices such as abortion, pornography, or human rights violations.
4. Encourages positive change: By investing in companies that are aligned with BRI principles, investors can encourage positive change and influence corporate behavior towards more responsible and ethical practices.
5. Mitigates risks: Companies that are involved in controversies or scandals can experience significant losses in value. By investing in BRI, investors can avoid exposure to these risks and potentially mitigate losses in their portfolio.
It is important to note that the definition of BRI and the specific screening criteria may vary depending on the investor's interpretation of Biblical principles.
This form of investing has been around for centuries. In the 18th century, groups such as Quakers and Methodists provided guidance on "sinful" investments to avoid because they conflicted with religious values.