Faith Based Investing

A casual discussion gets heated quickly

Bettie and I were having a conversation when we turned to her most passionate subject – defending and protecting life. Bettie, a long-time crusader champions for unborn children all over the world who do not have a voice. She attends the pro-life rallies, gives generously to causes she is involved in, and actively participates at pro-life conferences, prayer assemblies, and board meetings. Don’t forget Betty’s bumper stickers!  For Betty, this has been her twenty year fight with many successes and failures!

However, little did Betty know she owns investments in the very same companies she spent twenty years fighting. Through her investment accounts which consist of both mutual funds and stocks, she found out she owns companies:

1. Making abortion drugs
2. Actively funding Planned Parenthood
3. Operating hospitals and abortion facilities
4. Electively providing insurance benefits to provide abortions
5. Engaged in embryonic stem cell research

To say, Betty was appauled would be an understatement. Betty didn’t care how small the ownership was in any of these types of companies. Her words, “I want no involvement in any of these life sucking companies. I want to be a part of the solution, not the problem”

How about you? Are there moral or social issues important to you? Do you care as much about the source of the profit as you do about the amount? I’d love to hear your reaction…

I am reminded of two verses:

“For there is nothing hidden, which will not be revealed, nor has anything been kept secret but that it should come to light.” – Mark 4:22

“For everyone practicing evil hates the light and does not come to the
light, lest his deeds should be exposed. But he who does the truth
comes to the light, that his deeds may be clearly seen, that they have been done in God.” John 3:20-21

I just finished Doing Business God’s Way- What every Christian called to the marketplace should understand about God’s Laws of Prosperity by Dennis Peacocke.

When we view business in a different light – that of the Lord, we begin to see that He owns everything.  Not only that but He is also in control of everything.   This is a tough concept for me to wrestle with, especially in a “me” society.  I know there have been many times where I have failed to include God in “my plans”.

How about this?  What if we saw God as the CEO of our business. What if we looked at His Word as our business plan.  What if we focused on truly serving others rather than just making a profit?  Now I know many of you will say, “should we really mix faith and money?”   To quote Peacocke, “God is a businessman and He’s building a business.”  I love how he lays out a business plan based on biblical principles:

1. Change must work from the inside out – both personally and in your business
2. Change must happen from the bottom up (local to national to international)
3. Change must be comprehensive and not only look at today’s impact but the impact on eternity
4. Change must be affected by godly stewardship of servant-leaders

Here are a few other great takeaways from Doing Business God’s Way:

• We grow by caring for people and things
• Problems grow our character and generate profits. In other words, it is during our trying times that God does His best work and prunes us for future growth (personally and businesswise)
• All lasting wealth comes through the family unit and is built generationally – If we can pass wealth and wisdom, we can impact many generations to come!
• Work is a holy, everlasting calling.  Retirement may be worldly but we should never retire from God’s work. We can retire from a job or career but there is still much to do to serve Him!
• Service is the foundation of all lasting growth.  Look to truly serve others and improve their lives.
• I love this one: God pays for what He orders.  Many believe more money is the answer.  Yet God always funds what is important to Him.  Are you operating under His will or your own?
• Many of us are so afraid to fail so we sit in the same place – paralyzed! Yet, the possibility of a failure is essential for human growth.
• Ideas and actions have economic consequences.
• Here’s a controversial one: Men are not equal and economic redistribution cannot change this fact.  Think about it.  Can you jump as high as Lebron James?  Can you do business like Donald Trump?  Our gifts and abilities to create wealth are not equal…
• Get back to the roots of business and build from there!

Overall, this is a great book to inspire you to take a more disciplined, biblical approach to business.

What are your thoughts?  What other key business principles have helped you carry out God’s plan for your life?

Straight from the mailbag…

If you have a financial question, send me an email and I always do my best to get you timely and professional advice.   A question I often get is, “How do I pay for college and save for retirement at the same time?”

It can be done!

All across America, families are meeting a mighty financial challenge – the challenge of paying college costs with retirement potentially on the horizon. How do they do it? They go about it consistently; they also get creative.
First, make sure the priorities are in the right order. Strange as it may sound, your retirement may need to take precedence over your child’s college education.

Think about it. Your son or daughter might qualify for student loans or financial aid. By the time they are 30 or 35, they may have the earnings potential to pay those loans back. Do you see any ads out there for “retirement loans” or “retirement aid”? For most, it is much harder to earn money at age 65 than at age 35. Because of this, many choose to allow the younger generation to assume the debt.  Assuming debt isn’t always the wisest.

Each student should look at their desired field to see how viable it will be to pay off student loan debt.  Any time, debt is incurred, it should be viewed just like an investment decision: You should ask questions such as – how likely can I pay this loan off?  How much will this debt cost me (over time)?
Here are some short-term and long-term ideas you may want to consider if you have college costs on your mind:

1. Save for college monthly. While dollar-cost averaging is a useful way to build retirement savings, its merit often goes unrecognized when it comes to saving for higher education. If you could put $40 a month even in a basic savings account with a tiny interest rate, over 10 years that is approaching $5,000. That’s nothing to sneeze at, and will certainly help out. Move the money from a checking account each month into a savings account, or …

2. Consider a tax-advantaged college savings plan. Contribute to a 529 plan, which features tax-advantaged growth and tax-free withdrawals when the withdrawn funds are used to pay qualified education costs. Not all 529 plans are the same – in fact, some of them will even provide a small cash “match” or “sign-up” bonus when you start your plan. Some 529 plans are even “prepaid” – that means you may be able to secure future tuition rates at current prices, usually at in-state public colleges. Another advantage of the prepaid plans – they are often guaranteed by the state.

3. Exploit your credit card. No, don’t pay for college with it … well, at least not directly. Some credit cards give you a cash-back rewards option. You may as well put the rewards toward college. Some of the major banks let you do this and so do online shopping websites such as Upromise. Always read the fine print and never carry a balance on the card.

4. Keep your income as low as possible in the base income year. That is the calendar year that starts as your child is in the middle of his or her junior year in high school. That is the year when college financial aid departments start to look at a family’s earned and received income. If you can avoid taking capital gains or a distribution from a 401(k) or 403(b) in that year, that will keep your taxable income low. Will Roth IRA conversions raise eyebrows? Yes, they will.
However, don’t stop contributing to your own retirement savings accounts, and feel free to pay off consumer debts with the money from your savings and checking accounts – the assets in these accounts aren’t used in financial aid formulas.

5. Let the college know if your financial situation has changed. Has the value of your home fallen? Is your business netting you far less than it once did? Financial aid departments should be willing to review these developments and may be able to adjust aid for your student accordingly.

6. Make it a family affair. In some cultures, it is common for all members of a family to pitch in on the down payment or mortgage payments for a home. Consider this strategy as your family saves for college. Close friends and family members may be willing (or even excited) to make ongoing contributions to a college savings plan for your child, and/or an annual “birthday” contribution. They may find giving such a gift to be much more meaningful and fulfilling than a mere toy or item of clothing.

7. Go hunting for every scholarship or alumni connection you can. First, make sure you find a great school at a reasonable price – that’s important. But it may be just as useful (if not more) to be both creative and consistent as you save for college. While it has always been a challenge, by putting some thought into it, most families and students can find ways to respond.  Scholarships and other “student opportunities” can help reduce what you owe each year!

All in all, saving for two goals at the same time is a challenge.  It takes hard work, discipline, and a prudent strategy.  Please let me know if I can help you plan and implement a strategy to tackle both objectives…

Thoughts + Attitude = Outcome

Your thoughts and attitude reveal the answer to this question. Many people are willing to take risks when they are fairly confident they will win, but if they lose, then high risk wasn’t what they wanted. Many place too much value in risk tolerance questionnaires. They place too much weight on answering questions about risk then choosing investments based on a questionnaire.

This is a dangerous way to invest. This doesn’t mean considering you shouldn’t consider your risk tolerance. However, too many people rely on their tolerance when choosing their investments and do not know or understand what they are investing in. This is form of investing is gambling.

The key to avoid gambling is to fully understand any investment you make. If you have important financial decisions to make, it is prudent to seek sound financial advice from someone who can provide independent counsel and look at your interests first. Finding such persons is not always easy given the self-interests of many financial institutions.

Gambling in disguise

A lot of people think they are investing when in reality they are gambling. Many hand their money over to an advisor, money manager, or mutual fund company and have no idea where they are investing, yet hope for the best. Then if they lose a large portion of their investment they are surprised or disappointed. If you went to a casino and expect “luck” at the roulette table, you would also have to expect to lose money. When many invest, they turn to mutual funds and stocks hoping that the same type of  “luck” will make them a fortune. Yet they are surprised when they lose. Though I agree the odds are more in your favor in the stock market than at the casino, but this mentality is similar to that of gambling.

Become an investor!

Do you realize when you invest, you are investing in people? Even you think you are investing in a service, a particular stock, or mutual fund, you are actually investing in a company‘s integrity, its ability to create value, and the ability to bring their services/products successfully to the marketplace.

The product or service may be fabulous, but its success relies on its people. How many times have you seen companies lose money even though they have a fabulous product or service? This often happens because of poor management decisions, greed, or other inefficiencies. Though it is easier to make money with a great product or service, do not underestimate the importance behind the people managing as this will ultimately determine how successful your investment will be.  Are they upholding your values?   Do they understand your unique goals as a Christian?

How will you know what types of investments are right for you? Do you have passion, skills, and knowledge in regard to any particular type of investing? When you have knowledge and attitude for certain types of investments, the more you know the less it becomes gambling.

The line between investing and gambling is often blurred, but a surefire away to minimize it is to fully understand what you‘re investing in and why you are investing in it! Many blindly follow the advice of another professional‖ without researching what all of their financial options are. If you are going to invest, it is critical to take enough time to completely understand what you are investing in and why. That is why we started Faith-Based Investor, to take the time to research and find companies you can be “proud to own”!  By knowing our subscribers – devout Christians, we focus on finding companies that line up with their values and have great profit potential.  This, we believe, is a match made in heaven!

Don’t we all wear the same jersey?

It is amazing to me, how many Christians are at odds with each other over trivial matters. We essentially fight over who loves God “the most”, who loves Him the “right way” and other less pressing issues.  Too many Christians waste too much time fighting other Christians.

What if the body of Christ actually took Jesus’ advice and looked to help others, build them up, and work together to advance God’s work?  What if we took all the time and energy of fighting each other and instead worked toward helping and saving others?

Think of all the work that needs to be done: the church doors closing, ministries shutting down, people starving, those dying physically and spiritually.  There is no shortage of work that needs to be done yet the biggest obstacle to Christianity is often…well, other “Christians”.  How can we attract others to faith when we are so quick to fight one another?  No one is perfect, but if we don’t show the love of Christ toward other believers how can we possibly attract non-believers.  When we fight those on the same team, our opponent – the enemy wins! Let us fight the bigger battles and let’s stop wasting precious time!

I am reminded of Titus 3:9: “But avoid foolish controversies and genealogies and arguments and quarrels about the law, because these are unprofitable and useless.”

What do you think?

Just like magic

The purpose of a magic trick is to amuse and create a feeling of wonder; the audience is generally aware that the magic is performed using trickery, and derives enjoyment from the magician‘s skill and cunning. Traditionally, magicians refuse to reveal the secrets to the audience. They even take an oath to never reveal these secrets.

The Magician‘s Oath: As a magician I promise never to reveal the secret of any illusion to a non-magician, unless that one swears to uphold the Magician‘s Oath in turn. I promise never to perform any illusion for any non-magician without first practicing the effect until I can perform it well enough to maintain the illusion of magic.

Unlike the magician who relies on an illusion, many investors rely on true magic. They rely on what Albert Einstein described as the ―eighth wonder of the world‖- compound interest! Compounding, an investor‘s best friend, can certainly make you rich! It never ceases to amaze me when I look at the balances of some of my clients over the past fifteen years. What started with a few thousand dollars have become six figure accounts. Do you realize that some families thrive for generation after generation because of compound interest?

Money making more money

Trust funds, even invested conservatively, keep growing because with compounding, the trust earns interest on its principal, as well as on the other interest that has been accumulating. Getting started with investing as early as possible can make a big difference in how much wealth you amass. The benefits of saving early in life are greatly magnified by compounding. The power of compounding can make assets grow much faster. Where most investors make their biggest mistakes are using the wrong vehicles: taking too much or too little risk and paying too much in fees and taxes.

Being too conservative when you invest is detrimental to your wealth. I see many people become so fearful that they invest only in safe, guaranteed vehicles such as CDs, Treasury bonds, and money market funds. As life expectancies continue to rise, so do the probabilities that too-conservative investors may outlive their assets.

Being too aggressive is just as dangerous as being too conservative. Taking unnecessary risks and jumping into investments that are not understood are critical mistakes I see being made on a regular basis.

Too many people jump in and out of the stock markets at the absolute worst times. I see people finally get out at the bottom of the market only to get back in after a major recovery. I had a client that was notorious for his. I would spend hours with Phil. He would call to sell everything as the market was tanking and then call to buy back in after the market had a sharp rise. I had to remind him that the object is to “buy low” and “sell high”. Phil still calls me, but he has finally understood the concept the Warren Buffett describes best, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”

Some of my favorite Warren Buffett quotes:
1. “If past history was all there was to the game, the richest people would be librarians.”
2. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
3. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
4. “Only when the tide goes out do you discover who’s been swimming naked.”
5. “Price is what you pay. Value is what you get.”

The Midas Touch
Have you ever met someone who just breeds success?  They look at an opportunity and instantly make a killing?  Not long ago, I met two brothers from the Midwest who fit this mold.  Tom and his brother Greg had the Midas touch! No matter where they invested, success was soon to follow. Their claim to fame started in the late 80s when they built a  manufacturing company. By manufacturing other company‘s products they found a way to avoid expensive research costs, yet reap huge profits. After a merger in 1991, Tom and Greg took all their sweat equity and walked away with nearly $100 million. I asked Tom about his philosophies and keys to being a successful investor. Here is what he shared with me:

1. Don‘t expect the market or an opportunity to give you a second chance. You have to seize moment and take risks. Not careless risks, but rather calculated ones that have a high chance for a payoff.
2. Take action on your gut or years of learned experience. Your gut will rarely lead you wrong.
3. Understand the upside (best case scenario) and more importantly the downside (worst case scenario) before investing a dime. Plan for the worst and hope for the best.
4. Disregard advice that violates your common sense no matter how eminent the source.
5. Read the annual and semiannual reports. Study before you invest. If anything doesn’t make sense, sell it or don‘t buy it.
6. Admit and correct mistakes—sooner rather than later.
7. Keep your own independent counsel of advisors.
8. Be skeptical, not cynical. Trust your own research.

Now coming from someone who‘s been there, done that, made a fortune without sacrificing his principles, I‘ll listen. Here is one class act who claims Jesus as his Savior and let‘s his walk do the talking. He is one of the most generous guys I know!

KEY INSIGHT
God calls us to a life of commitment to Him. Our finances reveal our commitments in life. Where we spend, invest, and give our money reveals our priorities in life. As we grow in our faith, we should long to have our finances line up with God’s word. This means that we need to make a commitment to Him to make changes in our lives. Over the next year we will look at various ways to combine our faith and finances. Your journey begins today. Make a commitment to God that you will seek to learn His ways.

“Delight yourself in the LORD and he will give you the desires of your heart. Commit your way to the LORD; trust in him and he will do this: He will make your righteousness shine like the dawn, the justice of your cause like the noonday sun.” (Psalm 37:4-6)