Religious Funds: Stairway to Heaven or Highway to Hell?

As George Michael once sang, "You got to have faith." But is faith alone the basis for investing in a mutual fund?

By rolling out mutual funds that invest according to religious principles, some mutual fund companies are hoping that investors will literally practice what they preach. Though the number of these funds is small compared with secular funds, religious mutual funds are a growing niche within the socially conscious fund category. There are now at least 22 religious funds listed in the Morningstar database, up from just one, 10 years ago.

"You can get performance and stick to your principles at the same time," says F. Scott Valpey, portfolio manager of the Azzad Dow Jones Ethical Market Fund, which launched in October. ...