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!

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)

In the book of Mark, this question is posed: “What does it profit a man to gain the whole world, and forfeit his soul?” (8:36 nasb). Through the effort to find solutions to address the issues that go along with this question, faith-based investing was born. This movement seeks to align a person’s faith, moral beliefs, and ultimately God’s Word with the investment community.

There are now millions of religious investors attempting to align their morals and values with their investment portfolios. Religious concerns have long been a factor in the investment process because investors have wanted to avoid companies that contradict their belief system. This began with social screens such as alcohol and tobacco and has migrated to moral issues such as pornography and abortion.

There has also been a recent movement for investors to reassess their financial priorities in light of the corporate and mutual fund scandals that have surfaced over the last ten years. People are looking for more meaning in their lives and ultimately to make a more positive difference with their investments. This has led to the desire and ability to screen for more social and moral issues.

The rise in the number of faith-based mutual funds and money managers has opened the door to new avenues of investing. There also has been a surge in the level of sophistication in research available to advisors, money managers, and individual investors. As a result of this movement and awareness, millions now have the opportunity to put their money where their values are.

Simply put, faith-based investing  is a form of investing that seeks to please and glorify God. 1 Corinthians 10:31 says, “So whether you eat or drink or whatever you do, do it all for the glory of God.” (1 Corinthians 10:31 – NIV).

A great summary quote comes from Chuck Colson:

“In every action we take, we are doing one of two things: we are either helping to create a hell on earth or helping to bring down a foretaste of heaven. We are either contributing to the broken condition of the world or participating with God in transforming the world to reflect his righteousness. We are either advancing the rule of Satan or establishing the reign of God.”

- from How Now Shall We Live

Romans 12:2 also gives us good guidance:  “Do not conform any longer to the pattern of this world, but be transformed by the renewing of your mind.” (Romans 12:2 – NIV)

The Beliefs of a Faithful Manager

Faith-Based investors typically make investment decisions with four core beliefs:

1. God Created Everything.

This means you believe it all starts and ends with God just as stated in Genesis 1:1: ―In the beginning God created the heavens and the earth‖ (niv). If you believe God created everything—from the earth and the other planets to plant and animal life to humans to, more specifically, you—then this should be the foundation of your faith. Who is in control of everything?

2. God Owns Everything.

Psalm 24:1 tells us, ―The earth is the Lord’s, and everything in it, the world, and all who live in it‖ (niv). Your faith is your greatest asset in this world. As your faith continues to grow, your reliance on God should increase as well. Believing God owns everything will motivate you to a whole new level. This also leads to an important question: To whom does your money really belong?

3. We Are God’s Trustees.

First Timothy 6:17–18 exhorts, ―Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. Command them to do good, to be rich in good deeds, and to be generous and willing to share‖ (niv). Being entrusted with wealth carries great responsibility. If you believe God owns everything, isn’t your money really His money? He has entrusted the things of this earth to you, and He allows you usage during your lifetime, but He is still in control and the ultimate Owner. How, then, should you manage His money?

4. Managing Money Involves an Emphasis on Honoring God

The core of this belief is to look at how God would want His money invested. This involves an understanding of what God would support or condone. You may believe that issues or causes are not just black or white, that there are gray areas. Do you think God sees in gray? There is right and there is wrong. Man uses gray to justify his lifestyle. Rather than be convicted of wrongdoing, man often changes what God intended to suit his needs rather than God’s desires. How should God’s money be invested?

What are your thoughts?  Did I miss any main points?

1. To be a good steward. Money and possessions are on loan to us from God. By learning about the various options that are available to us, we can make the best decisions. Careful study, prayer, and education are necessary. If you were buying a car would you buy the first one available? Most people will do some research, compare features, options, and prices. You would possible test drive various models and shop different dealers to select the right vehicle. It involves many steps. It is the same with investing. There are several steps you need to take to educate yourself on all of the possibilities so that you can narrow in on the type that is most beneficial. God expects us to be wise in the area of finance. If we do not desire to do this, we are expected and commanded to seek wise counsel. Like the thief who pleads ignorance, the judge will still sentence him as this is no defense. We are called to do the best with the resources that God provides.

2. To learn to defer gratification. By saving and investing we are able to delay things that we want today in preparation for tomorrow. This has been a real sore spot for many. They wrestle with the faith versus reason battle. It’s the chicken or the egg dilemma! If we do not save for our futures, we impose on someone or something which drains resources. I have this friend, Tony, who has a great heart for the Lord. He would often get in bitter disagreements with his friend Jeb over where faith and reason separate. Tony, who was taking care of a family of four, often would purposely not bring lunch or money to work, in hope that ―God would provide‖. Jeb saw this and grew angry as this appeared to be using a lack of reason and disguising it as faith. It nearly tore apart their relationship. We need to be careful that we are not so close to the edge that we blinding cry out ―faith‖ when reason could solve the problem. At the same time, we cannot take God out of the picture and always claim reason. By praying and carefully examining our options, we can begin to achieve the correct balance. Delaying our immediate wants allows God to provide for our needs and prepare us for bigger things to come.

3. To provide for our family’s needs. (ie: college, a home, etc.) As a father, I have the tremendous pleasure of providing for my families, physical, mental, spiritual, and financial needs. As the sole bread winner, Karen and I decided early in our marriage that when it came time to have children, she would stay at home with them. This was a clear and easy decision to make. We wanted that close relationship to be at home until the children went off to school. As a provider of the family, saving and investing allows for me to provide an adequate back-up plan for my premature demise. I have faith that God would provide, but why drain resources when I can use the skills and resources God provides today to prepare for tomorrow.

4. To become more effective long-term givers. As we strive to reach the ideal saving plan, we begin or continue to give to God what is rightfully his (10%) and build up a reserve for future callings by the spirit and prepare for our future. These new found habits, create a longer-term perspective. This prepares and teaches us how to be better long-term servants.

5. To prepare for our own retirement needs. Without planning for your future, you rely on others to take care of you- the government, the church, your family, your kids. If you have the means to save now for the future, it makes sense when combined with the other two parts of the savings plan. This is not hoarding, it is wise and careful planning.

The Ideal Saving Plan

Here is a safe plan to consider:

“The Three Tens”

10% to God first

10% for a rainy day or future blessings account

10% to savings for the future (retirement, college, etc)

This allows for us to have a starting plan in place to align our faith with our finances. By paying God first, saving for emergencies and opportunities God provides, and saving for our future and our family’s future, we have clear defined goals. We are ready and awaiting God’s future instructions and ready to walk into the marvelous light. What if we were all prepared and ready to assist when others were in need. Sin would lose its power, death would lose its sting ,we would obey God’s word. The impact that we could have for the kingdom would be overwhelming and abundant.

What are your thoughts?  Am I on target?  Did I miss any?

You may not want to believe this, but if you have any money in five of the largest, most widely used mutual funds, your values are probably being violated. In fact, I’ve researched, studied and examined 5 of the largest equity mutual funds based on their reported holdings and found that on average 59.5% of the companies being bought failed one or more screens(as of June 2010).

But what does that mean to you as an investor with strong moral values and convictions? Take a look and you’ll see that on average…

• 19.8% of the companies in these mutual funds are supporting Planned Parenthood, performing abortions, and/or funding embryonic stem cell research!
• 10.5% of the companies in these mutual funds are involved in producing, distributing, and/or promoting explicit sexual materials.
• 12.7% of the companies in these mutual funds are involved producing, distributing, and/or promoting anti-family entertainment.
• 58.2% of the companies in these mutual funds are offering same-sex benefits, and/or actively sponsoring, promoting, and endorsing homosexual activities.
• 1.4% of the companies in these mutual funds are involved in Tobacco and Alcohol production and distribution, and/or gambling.

Step One: It starts with you

The following is a list of causes and concerns that may affect your moral decisions. These hot buttons are the most common examples of issues that generate strong emotional responses. If any of these issues are of concern to you, I strongly advise that you begin to consider the implications of investing in companies that violate your internal moral compass. There are tools and research available to help you eliminate or minimize your involvement in these hot buttons.

Negative Screening: Screening issues and causes important to you out of portfolio.

Positive Screening: Screening issues and causes important to you into your portfolio.

Examples of negative screens

Moral issues:

• Abortion
• Homosexual Activism
• Pornography
• Human Rights of the Poor
• Embryonic Stem-Cell Research

Social issues:

• Alcohol
• Antifamily Entertainment
• Gambling
• Poor Environmental Record
• Tobacco

Here is a question to ponder: Would you purposely invest money in companies involved in any of the areas listed on the hot-button list? After taking some time to examine this list of hot buttons, what issues, if any, most resonated with you? Are there any areas in which you wish to avoid investing in your financial life? If any of these issues ignite strong emotional responses, is your passion strong enough that you want to do something about it?

Examples of positive screens

Companies:

• Helping the poor and underprivileged
• Creating cures for life threatening diseases
• Building and fostering their communities
• Operating with Judeo-Christian principles and ethics
• Producing products and services that enhance the lives of their customers and employees
• Producing wholesome, family-friendly entertainment

Step Two: Create a faith-based investment portfolio

This step involves three important components: research, screening, and finding alternatives.

1. Research Companies: Determine what activities you do not want to support (e.g., abortion, pornography, anti-family entertainment, non-marriage lifestyles, alcohol, tobacco, gambling). After deciding, identify the companies involved. In order to do your own research or rely on the research of others, you need to fully understand what you are screening for. For example with abortion where will you draw the line? Will you only screen out companies directly involved in the abortion industry or will you also screen out companies donating to Planned Parenthood? How do you personally draw the line?
2. Screen Investments After you have determined which companies violate your morals, you’ll need to check the funds and stocks that you hold in your portfolio. To accomplish that task, you will need to perform a portfolio screen by comparing the screened companies to the portfolios of various or specific mutual funds.
3. Find Alternatives You will then search for companies that meet your financial criteria without sacrificing your moral integrity. You will have many choices. It is estimated that among the eight thousand or so publicly traded companies, less than 10 percent fail most screens.

Which Road Will You Follow? In dealing with your personal commitment of time and effort, there are two options. You can choose to use faith-based mutual funds or buy individual stocks.

Path One: Mutual Funds When selecting a faith-based mutual fund or funds, look beyond the fund’s name or category. The popularity of socially responsible investing has led many mainstream brokerage houses to create their own ethical investing funds. Such funds often sound good but promote a liberal ethic. The same can be said for religious-based funds as well. Check the fund’s screening policy. Select a collection of funds in line with your values, then evaluate them for risk performance and appropriateness before investing. Even if you are locked into a limited family of funds through your employer’s retirement plan, you can still weed out those funds with the highest exposure to ―sin stocks.

Path Two: Individual Stocks If you prefer a more hands-on approach, many tools are available. You can select your own stocks or hire your own manager to help you. Internet-based brokers allow even small investors to investigate and purchase stocks on their own. I recommend using Folio Investments, an on-line investment firm. This site offers individual investors the opportunity to build their own basket of hand-picked stocks from scratch for a reasonably low fee. You screen companies to ensure they do not violate the moral and social hot buttons you have chosen and also select companies that meet your financial criteria.

Let me know how I can help you on your journey!

Check out Faith-Based Investor and Faith-Based Portfolio.  Two services that can help you!

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C. S. Lewis once said, ―All that is not of eternal use, is eternally useless.‖ This is completely the point of true wealth. It has an eternal purpose. It has a foundation in faith, love, and God. Do you love people and use things or use people and love things? The driving force for accumulating true wealth is to advance God’s kingdom.  Check out www.thriveinyourlife.com

Thrive in your life

Who needs your help? When you look past your self-interests and seek to bring joy to others, God will bring joy to your life. It is more joyous to give than to receive. Make a commitment to live a simple life and use your wealth to support worthy causes. Until you get your priorities straight and focus on the truly important things in life, it will be nearly impossible to put principles before profits.

Once you align yourself with God and place Him first, you will often be ready to make two important mind shifts:

1. You will begin to care more about where you invest His money.
2. You will look for ways to multiply His money to help more of His people.

By pursuing these two philosophies, you place God first and break the stronghold of materialism. Place principles before profits and focus on people rather than things. This is an important step in the journey toward true wealth.

Many humans love risk.  It often makes us “feel” alive.   Take the puffer fish:  Puffer fish are the second–most poisonous vertebrate in the world. The puffer’s skin and certain internal organs are highly toxic to humans, but nevertheless the meat of some species is considered a delicacy in both Japan (as fugu) and Korea (as bok). Chefs are trained to know what’s safe and what’s not safe to eat.

Eating poisonous fish, jumping off cliffs, sky-diving, and various extreme sports show the human desire to push the envelope. This can be exciting and rewarding.  When it comes to your finances, taking risk can also be rewarding.  However, when you take risks without understanding them, you often don’t get your desired results.  During downturns in the market, like we are presently seeing, we get to see the negative side of investing in stocks.  Having a calculated plan of action – a buying discipline as well as selling discipline is essential.

Too often I see people handle over money to a financial advisor or a mutual fund believing their advisor or manager will protect them from losses.  Far too much confidence is placed in this area because of three main reasons:

1. Many investors miscalculate their risk comfort level – they want all the upside of the market with little to no downside.  In other words they have unrealistic expectations.
2. Many investors misunderstand what they are investing in.  With all of the various risks such as business , market, inflation, currency, and political risks, to name a few, many investors fail to recognize their nest egg is susceptible to more risk than they bargained for.
3. Many investors let emotions dictate how they invest.  Becoming too fearful or too greedy are recipes for investment disasters.

Bottom line, the markets are dangerous right now and I am not very confident in the short-term direction of the markets.  The risk level is too high given all of the factors on the table.  Right now I’d be extra cautious – I’d rather be safe than sorry.  Taking risk is a part of life but knowing when to risk and when not to risk is the difference between making and losing money in the markets.   Just like the puffer fish, I just talked about, instead of knowing what’s safe to eat, you need to know what’s safe to invest in.  You have to be extra careful what you buy right now.  Do you know which investments are most dangerous right now?  Not knowing this could be toxic to wealth!

Check out www.faithbasedinvestor.com, we tell you what to buy, what to sell, and tell you exactly when to trade.  It’s only $99 a year!