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Does Vice Pay? The Answer May Surprise You

Does it pay to be bad? There’s an increasing amount of evidence which shows that it does.

The latest set of sin figures comes from SigFig. SigFig tracks over $350B in assets through partnerships with Fidelity, Schwab, and Ameritrade. The platform uses algorithmic strategies to organise portfolios for investors, reducing risk and minimizing fees. The asset management platform has just published a report titled “Does Vice Pay”, which looks at investor ownership of vice stocks, and how these vice stocks added, or detracted from performance during the past 12 months.

Low ownership

SigFig’s data shows that 1 in 8 stock investors (12.5%) on its platform owns a vice stock. In this case, SigFig defines vice as tobacco, marijuana, casinos and alcohol. The vice sector with the highest ownership is tobacco. 7% of the platform’s investors owned tobacco stocks — Lorillard, Reynolds American, Altria or Philip Morris.

Surprisingly, the vice sector with the smallest ownership as a percentage of SigFig platform users is alcohol. Only 1.5% of SigFig users have money invested in the alcoholic beverage sector. SigFig defines the alcohol sector as — Anheuser Busch Inbev, Molson Coors, Boston Beer, Craft Brew Alliance and Constellation Brands.


Marijuana stocks were the second most owned vice stocks of SigFig users. 2.3% of Sigfig users held a marijuana sector stock in their portfolio at the time of the study. Casinos came in third place, with 1.7% of SigFig users owning a casino stock.

Who owns vice?

What’s really interesting about SigFig’s report is the group’s data on “who invests in vice”.

SigFig’s data shows that tobacco investors tend to be older, wealthy individuals with an average age of 55 to 60 and more than $500,000 in liquid investable assets. The majority of tobacco investors seem to come from red states.

The average alcohol investor also comes from a red state and tends to be older than average, with a mean age of around 50 and more than $500,000 in liquid assets. The average age of all investors on the SigFig platform is around 42 with $200,000 in liquid assets. The average marijuana investor on the platform has an average age of around 47 and under $100,000 in liquid invest-able assets.


Does vice pay?

But does vice really pay? Based on the performance of the four sectors SigFig studied, it doesn’t, or it didn’t over the past 12 months. SigFig’s numbers show that over the 12 months to 04/13/2015 the S&P 500 produced a total return of 12.7%. The median investor return on the SigFig platform was 7.5%.

However, as the chart below shows, investors with positions in alcohol and tobacco companies outperformed the average investor over the twelve-month period. Although vice investors still underperformed the S&P 500 over the period.


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