Faith Based Investing

Here’s why it can be a good idea to prepare.
With all of the reckless government spending, many are becoming concerned about the potential devastating effects of inflation.  Significant inflation is not only feasible, it is very likely. I wanted to take a few moments to update you on what is going on in the economy, how inflation can be dangerous, and provide several investment ideas that will help us fight inflation in the upcoming days.

Why is inflation inevitable?
With Democrats and Republicans alike agreeing deficits are necessary to fight our current economic crisis, Obama and his party have no constraints on how much they are willing to spend! “Sky’s the limit!  Heck, they have already committed to spend over trillion-plus dollars over the next two years alone.

So how will we pay for it?
We really only have two ways to pay for the spending:
(1) Printing more money, which causes inflation, and/or
(2) Hiking taxes, which kills investment, businesses and jobs.

Why is inflation dangerous?
Inflation simply means rising prices. But in addition to retail price inflation measured by the Consumer Price Index, you also have monetary inflation – the growth of the money supply, or the total amount of money in the economy. (Our money supply includes dollars, checking and savings accounts, CDs and money market funds, and short-term transfers of securities in exchange for cash.)

Here is the great balancing act of the Federal Reserve. If it eases the money supply (think lower interest rates), borrowing costs decrease, and investment generally increases. But with easy money, price inflation and currency devaluation follow. The Fed can fight inflation by raising rates to effectively tighten the money supply, but with possible byproducts of reduced consumer spending, lower corporate earnings, and less investment.

Is the government helping or harming the economy?
My opinion is the government is doing much more harm than good with its current spending.  We must realize that government intervention is magnifying, not solving the problems that caused the crisis!  It’s only when the patience of the public with Obama’s remedies run out that we can get the train back on the tracks.  However, this probably won’t happen until at least mid-term election time (late 2010), maybe re-election time (2012) or even thereafter.

What do you do in the meantime?
There are many ways to protect you and your family from the potentially dangerous effects of inflation. Hard times for America do not necessarily mean hard times have to come for you.  No matter what the economy is doing, no matter what the state of financial markets are there is always a strategy available that can make you money. The key is to recognize opportunities wherever they may be and, more importantly, detach from old investment strategies that are no longer working.

Here is a list of inflation protection securities.  Please note these are a list of suggestions.  These are not recommendations.  Please do your own research before purchasing. Here are six ETFs with the potential to do well if inflation takes off:

Holding (Symbol)

IShares USTIP Securities (TIP)
IShares COMEX Gold (IAU)
IShares Silver (SLV)
Proshare Ultrashort 20+ Year Treasury (TBT)
Proshares Ultrashort 7-10 yr Treasury (PST)
SPDR Gold (GLD)

Let’s be realistic: the next several years may be the toughest ones for Americans in their lifetime. However, they do not need to be tough years for you if you prepare, trust in God, and find and follow sound investment advice.

Grandpa should have listened

How many times have you heard, “it’s not you earn, it’s what you keep”? I sure wished my grandfather had paid attention to this principle. However, if he had I may not be a financial advisor today. You see, I got into this industry because of my grandfather, who was quite possibly, the hardest working guy I ever knew.

Willis worked three jobs to put food on the table for his wife and seven children. He retired with nearly $500,000 and a pension. He put his life savings into CDs and then inflation, taxes, and eventually the nursing home took everything he worked for. I saw this as a teenager and got into the financial services industry to make a difference. Today, I treat each client like a part of my family and give advice based on the best available information and options available. It breaks my heart to see so many people allow the “three great enemies” to attack their life savings.

What are those three enemies?

* Time – will we have too little or possible too much time (outliving our money)?
* Taxes – will we pay too much in taxes to Uncle Sam?
* Inflation – will our purchasing power be eroded?

Today, let’s look at an enemy that is almost guaranteed to get worse for most of us. With the out of control deficit, our government spending like drunken sailors, and the President determined to pass the greatest welfare program in history (healthcare overhaul), one thing is for certain: taxes will have to go up! And not just for the wealthiest Americans, it will hit the middle class the hardest. Most of the wealthy have very good tax advisors, know how to play the game, and have ways to absorb a tax increase. Most of us aren’t so fortunate!

One of the most overlooked areas of our financial life is tax planning. When you read about investing and other financial topics, you occasionally see the phrase “tax efficiency” or a reference to a “tax-sensitive” way of investing. What does that really mean?

The after-tax return vs. the pre-tax return

Everyone wants their investment portfolio to perform well. But it is your after-tax return that really matters. If your portfolio earns you double-digit returns, those returns really aren’t so great if you end up losing 20% or 30% of them to taxes. In periods when the return on your investments is low, tax efficiency takes on even greater importance.

Tax-sensitive tactics

Some methods have emerged that are designed to improve after-tax returns. Money managers commonly consider these strategies when determining whether assets in an investor’s account should be bought or sold.

Holding onto assets

One possible method for realizing greater tax efficiency is simply to minimize buying and selling to reduce capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions.

Tax-loss harvesting

This means selling certain securities at a loss to counterbalance capital gains. In this scenario, the capital losses you incur are applied against your capital gains to lower your personal tax liability. Basically, you’re making lemonade out of the lemons in your portfolio.

Assigning investments selectively to tax-deferred and taxable accounts

Here’s a rather basic tactic intended to work over the long run: tax-efficient investments are placed in taxable accounts, and less tax-efficient investments are held in tax-advantaged accounts. Of course, if you have 100% of your investment money in tax-deferred accounts such as 401(k)s or IRAs, then this isn’t a consideration.

How tax-efficient is your portfolio?

It’s an excellent question, one you should consider. But this brief article shouldn’t be interpreted as tax or investment advice. If you’d like to find out more about tax-sensitive ways to invest, be sure to talk with a qualified financial advisor who can help you explore your options today. What you learn could be eye-opening.

How to control your taxes?

As President of Faith-Based Investor, our firm uses tax efficient strategies for many of our clients. Instead of using tax inefficient vehicles like mutual funds where we have no control over how much or when our clients pay taxes, we use Exchange Traded Funds (ETFs) and individual securities. This allows us to have better control as to when and how our clients pay taxes. We also help determine asset location (not to be confused with asset allocation of which we help with too). Asset location is setting up the proper amounts of taxable, tax-deferred, and tax-free accounts. As you are probably overlooking many tax saving opportunities, I encourage you to seek a professional who specializes in tax efficiency.

Another health and wealth gimmick?

When many people read that I am the author of The Faith-Based Millionaire, they jump to conclusions.  This must be another book luring Christians to get rich.  Or, here’s another one of those health and wealth gospel books.  Not too long ago, I had a pastor refuse to read it simply because of the title.  He then wrote me a three page letter saying I was sending people straight to Hell.   Wow!  I guess if he took as much time to flip through the book as he did writing the letter, he may have seen the true heart of the book which is this:  God doesn’t need our money. He uses it as a tool to help His people. Those blessed with wealth have a greater responsibility.

I have found the wealthy:

    * Can treat wealth as a blessing or curse
    * Can use wealth for good or evil purposes
    * Can allow wealth to come between them and God or use wealth to grow closer to God through wise stewardship principles.
 
Many times we judge a book by its cover.  We make an assumption based on a false belief.  In fact, The Faith-Based Millionaire was written about my interviews with Christians who had a strong foundation in Christ and were millionaires.  It details twelve essential habits that lead them to wealth.

Love Money or God?

Make no mistake about it, Jesus warned us about riches: “Any one of you who does not renounce all that he has cannot be my disciple” (Luke 14:33). He also said, “People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction.” (1 Timothy 6:9).  The biggest warning came when Jesus said, “How difficult it will be for those who have wealth to enter the kingdom of God!”  and “It is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.”

I argue virtually every one living in America is rich compared to world standards. Don’t believe me, check out www.globalrichlist.com.  Plug in your income and you’ll probably find you’re among the richest in the world, even if you only make a few thousand a year.  More important than wealth is your attitude about money.

It is the desire to be rich (love of money) and not the wealth itself that can isolate us from Christ.  I have seen many who are poor spend all their time thinking about money and those with wealth care less and vice versa.  It’s our attitude that determines how we view this neutral object.  We can either fall in love with money or see it merely as a tool (means to an end). Either way, we cannot underestimate the power of money and its ability to influence our attitudes. 

Wealth with the wrong attitude is a bad thing.  It can consume you.  It can make you think you’re better than others.  It can lead to greed and slothfulness.  It can come between you and God if you let it.  The Rich Young Ruler chose wealth over God – He wasn’t foolish because he had money, but rather because of his foolish attitude.

With the proper attitude and Christ central in your life, you can make a difference with your money. It can be used to fund ministries, build churches, save lives, and change hearts for Jesus.  We can use giving while we are alive and upon death to create a lasting legacy, to teach generosity to the next generations, and pass wisdom along with wealth.

Wealth for many can mean financial freedom – the ability to go and do the things that God calls you to do without financial reservations. This attitude is clearly more about freedom than money.  Without money, freedom is harder to find.  It is difficult to help more of God’s people. It is not that God wants our money; He desires to know that you place Him first in your life.

The Faith-Based Millionaire Creed

Of those who have been successful and treat wealth as a blessing, they made a commitment to always place God first.  For many of these faith-based millionaires it began with a creed. A creed, according to American Heritage Dictionary, is “a formal statement of religious belief; a confession of faith or a system of belief, principles, or opinions.” 

Here are a few common threads of the faithful and wealthy.   Do you share any of these beliefs?

1. You are called to increase your money. Whatever you have, be it an extra $10 or $10,000, it was provided to you by God, and it’s your duty to multiply it. Look no further than the Parable of the Talents in Matthew 25 of the New Testament. Even for a nonbeliever, it still makes sense to increase your assets to help humanity. In order to increase your assets, you will need to control spending, minimize debt, save regularly, and achieve a reasonable rate of return.

2. You can’t expect to be blessed by investing in organizations that support things contrary to your beliefs. If you truly do believe in God, you can’t expect blessings of any type from supporting anything that contradicts your faith; it just doesn’t work. This brings to the surface the idea that those of faith are called to a higher purpose. Nobody said faith made life easier; faith in fact often makes life harder! You may achieve profitability without placing your principles first, but the bigger question is: Will God continue to bless you–not just financially, but spiritually and health-wise?

3. Wealth will not come to you because you have faith. Make no mistake about that statement; adhering to the wisdom of your faith is your best bet to gain wealth. While it is generally true that obedience and faithfulness to God, combined with using His principles, lead to prosperity, it is quite inappropriate for you to presume on this rule of thumb, or to make demands of God. God does not promise you a life free of troubles, financial or otherwise. As dictated in the Bible, we all are called to a life of stewardship—sharing our time, talent, and treasures.

You who are just starting out and trying to transform your financial situation may not be postured at this time to give the amount of treasure you would someday like to contribute. Don’t seek to be rich.  Seek to be more generous.  God will take care of the rest.  Stewardship can also consist of offering time and talent. Therefore, those in poverty or with limited income may not be able to give much treasure but instead contribute their time and talent, which are of equal value; while those with more limited time or talent but also more wealth can choose to share their treasure
 

I love David Crowder Band – they’re one of my favorite bands. They have a new album coming out next month and to promote it put this hilarious video together, This is a good piece of viral marketing:

CLICK HERE or watch down below

Over the years I have met many people who are shocked to
realize where they are investing. A few
months ago I met a guy we’ll call Robert.
Robert was a minister in a
growing church in New England. He had
been a dedicated Christ-follower for nearly thirty years and a quite active
investor. Before he met me, he had never
put much thought into his investments or the values it reflected.

After an analysis of his portfolio and exactly where it was
he was investing, he was shocked to say the least. His face turned white as he read the names
and what activities each company was involved in. The companies he owned were involved in:

• Producing pornographic videos and magazines
• Actively donating and lobbying for pro-abortion
  organizations like Planne
• Parenthood
• Producing abortion-related products and drugs
• Operating casinos and gambling facilities
• Manufacturing and distributing alcohol and
  tobacco

Here Robert was making conscious decisions not to support
unfavorable companies that did not reflect his values. In spite of these conscious decisions in his
consumer life, the end result showed that some of Robert’s investment purchases
had slipped through the cracks in his portfolio. Many of his investments directly violated his
values and were not the types of companies he could be “proud to own”. The question for him became, “How can I
continue doing this with a clean conscious? If I do profit from my current investments,
was it the moral and ethical thing to do?

Where
to Draw the Line?

You make deliberate choices in your life each and every day. Such choices include, but are not limited to:
where you work and earn income, where you spend your income, what charities and
ministries you support, and where you invest your savings.

Some questions to ponder:

Work: Is it morally acceptable to work at an
abortion clinic?

Spending:
Is it morally acceptable to purchase
pornography?

Giving: Is it
morally acceptable to donate money to homosexual lobbyists or fund embryonic
stem cell research?

Investing: Is it
morally acceptable to neglect where you earn your profits? What’s more important: the size or source of
profit?

Many unknowingly invest in mutual funds that buy the
following types of companies:

• Companies that profit from abortions
• Companies that profit from online pornographic websites
  and adult entertainment nightclubs
• Companies that profit from cloning animals and embryonic stem
  cell research
• Companies that actively promote the homosexual lifestyle

After completing the moral audit for Robert (a free service
at www.faithbasedinvestor.com),
he was shocked to realize he was profiting from many industries and companies
that violated his values. He found that
he was supporting all of the above areas with his investment dollars. Even
though he strives to support causes he believes in and avoid things he is
opposed to, these factors were never considered in his investments. Each year
his investment dollars were supporting values that blatantly contradicted his
belief system. Bottom line, Robert felt that he was working against
himself. He felt like he was donating
money to kingdom purposes yet supporting companies with his investment dollars
that were in violation of God’s Word. He
thought, “How could God bless these investments when they clearly are opposed
to His teachings”. It just didn’t make
sense to Robert.

Where
the Real Power Is

You may be thinking, Robert was not directly investing in
these companies, so what difference does it really make? After all, the
companies that he owns in his portfolio don’t really benefit much from an
increase in stock prices. Or do they? Isn’t this similar to when you buy a used
Ford on a random car lot and Ford does not receive any benefit from that used
car sale?

The truth is: there really is power in your choices. Money
is a form of power. If you want to change the world, start with your actions.
You have the ability to create change. Stock prices are affected by supply and
demand. Supply represents the number of outstanding shares that a company has
in the marketplace. Demand is represented by the number of investors willing to
pay for the stock of a company. Typical CEO and executive bonuses are tied to stock
performance. Boards of directors and key shareholders care what the price of
their company stock is. Employees who may have stock options and company stock
in their 401(k)s care about the share price. This directly means that typical
executives, employees, board members, and key shareholders are affected by the
increase or decrease of a company’s stock price.

If you want to change a company’s behaviors, affect them
where it really hurts: their stock price. It is virtually impossible to boycott
every product a company manufactures; however, it is easy to avoid buying a company’s
stock. If millions of like-minded investors rallied together to do the same,
you could not only affect Wall Street, you could change the direction of this
country. Reformation in America is more likely to happen through Wall Street
than through the White House. Lobbying can be effective, but changing corporate
America is the key! Corporations will listen when Americans begin avoiding
their company stock because of immoral activities.

Case in point, I was listening to the radio not too long ago
and heard a news report that a major pornographic distributor reported
significant losses for their net earnings report due to a 30 percent drop in
advertising revenues. If investors avoid buying a company because they
advertise in a pornography magazine, that corporation will evaluate their
advertising practices. This can hurt a company where it really matters: their
wallet!

How many times do we talk the talk but don’t walk the walk?

Actions speak louder than words!  Are we living any different than the rest of the world?

This video is a must-watch!

Many investors choose to handle their own finances. Typical reasons why people choose to invest on their own include, but are not limited to:

• Lack of trust in financial professionals.
• Cost issues–don’t want or cannot afford to pay for advice.
• Expertise in the area of finance.
• They enjoy and have time to do the proper research.

Lift the Fog
Money can be a form of power, but the ultimate financial power is education. With the proper knowledge of how money works, you will enable yourself to make wiser financial decisions that foster a greater financial well-being. Commit to learning more about stocks, bonds, investing, and other financial topics. You can either continue working for money or find a way to make it work for you.

Develop a financial aptitude
One of the most important things to learn is not how to make money, but rather what to do after you make it. Always evaluate your decisions by asking, “Does what I’m doing make financial sense?” Keeping up with the Joneses and following the crowd is like a sheep being led to the slaughter. Dare to be different. Learn what it really takes to build wealth. Money may come and go, but if you have an education in how money works, you gain power over money and can continue building or rebuilding wealth if necessary.

Know When You Are in Over Your Head
It is wise to use your gifts to the best of your ability. It also makes sense to seek help when your abilities are limited. Take me, for example. I have discovered what I am good at and what requires professional assistance. Household improvements and repairs are not my strong suit. I learned very early on that this is an area that requires help immediately. After several “experiences” of making bigger problems out of small routine repairs, it has become quite obvious this is an area where I lack gifts. I can make a mountain out of a molehill! Simple tasks for most people turn into a big mess for me. Believe me, it is not fun paying someone to fix not only the original problem, but also the new problems I have created.
Sometimes, even when you have the expertise, knowledge, or skills, it is still important to have a sounding board to bounce ideas off of and receive wise counsel from. A prospective client, Bill, was a middle-aged CFO with more than twenty-five years of financial experience, an MBA from a good school, and decades of investment experience. The thorn in his side was his investment portfolio! Despite the schooling and book knowledge, Bill’s portfolio was a mess and nearly impossible to keep track of. Like the weeds that took over the garden, Bill left his portfolio untamed. Bill had “over-diversified” his holdings. He owned hundreds of stocks, mutual funds, and bonds. Tracking, analyzing, and monitoring all of his positions would make a full-time job. Bill thought he knew what he was doing, but his results confirmed otherwise. Bill should have sought wise counsel.

Why Do I Keep Losing Money?
Most investors who manage their own portfolios fail to keep up with the stock market averages. For example, in 2007, DALBAR, Inc. (www.dalbar.com) found the average equity investor underperformed the S&P 500 index by 7.5 percent per year for the twenty-year period from 1987 to 2006. Remarkably, this was not the first time investors have failed miserably in their quest for stock market wealth. DALBAR had found similarly poor performance in each of its previous fourteen annual Qualitative Analysis of Investor Behavior (QAIB) reports. They concluded the problem is behavioral. Investors make poor choices, and their improper investment behaviors are corrosive to their success.
Will Rogers once said, “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, and then sell it. If it don’t go up, don’t buy it.” Ironically, good investment choices are the goal of every rational investor. No one seeks failure, yet failure persists.  Decades of data dispute the fact that most investors fail to recognize they have a problem, let alone pursue strategies that solve their shortcomings.
Good choices and sound investing are illusive. If taming bad behavior was easy then everyone would make the appropriate course corrections as soon as they stubbed their investing toes enough to learn they were traveling on the wrong road. What should an investor do to fix his or her poor behavior patterns?
DALBAR suggests professional help is critical to bridging the gap between purpose and  performance. QAIB 2007 states, “The most important role of the financial advisor is to protect clients from the behaviors that erode their investments and savings.”
 
I will leave you with some common goals to help improve upon what you’re already doing or motivate you to find professional assistance:
The five common goals of every faith-based investor should be to:
1. Know yourself and not let emotions make your investment decisions
2. Listen and follow the Word of God as it relates to your investment portfolio.
3. Buy low and sell high.
4. Avoid unnecessary costs, fees, expenses, and taxes.
5. Sometimes paying for advice will cost you less than the mistakes you may make if you go it alone.