Faith Based Investing

Respect for the humble CD?

When the stock market turns volatile, people take a second look at fixed-rate investments, including certificates of deposit. In a bull market, the CD may seem like just about the most unattractive investment choice out there. But during downturns, those who own CDs can be thankful for their cautiousness.

A classic interim investment?

Often, people choose to put money in a CD when they are “between investments” – that is, as they move a portion of their assets out of the market or a market sector for the short-term. While leaving the stock market altogether is a laughable and ill-advised idea for the serious, committed investor, most CDs are FDIC-insured and thereby offer safety of principal (up to $100,000) along with a guaranteed rate of return.

A CD is certainly a commitment: you can’t pull the money out of one until the end of the specified term. (If you need to withdraw your money, you’ll almost always pay an early withdrawal penalty.) You also want to find a CD that offers returns sizable enough to keep ahead of inflation and taxes. With interest rates still near historic lows, it may be tough to find attractive rates.

The tradeoff of a CD is easily expressed. We all want CDs with higher rates of return, but this usually means CDs with longer periods until maturity. The longer the wait, the longer the investor goes without access to those funds, and the greater the potential opportunity cost of not assigning those assets to an investment that might perform better.

What About Index-linked CDs?

Some CDs offer you the chance to earn stock-market like returns. As the term implies, index-linked CDs are linked to the performance of a particular stock index. Often, they will match 90-100% of the return generated by an index, and some offer guaranteed minimum returns regardless of how the linked index performs over the term of the CD.

Should you move money into a CD?

For the short-term, given this challenging market, it is an option to consider for a portion of your money. Far too many retirees put their full nest egg in CDs which is often a very costly mistake in the long run. Before you make a move to a CD, be sure to speak to a qualified financial advisor about your financial direction – for today, and for the long term.

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?

Going in reverse?

Sometimes we get stuck!  We are going no where or worse we start heading in the wrong direction!  Whether it’s in our jobs, careers, spiritually, physically, maybe financially.  I talk to a ton of people who look at where they are today and are no further ahead than they were 5, 10, 15 or  even 20 years ago.  It reminds of the U2 song “Stuck in the Moment”:

“You’ve got to get yourself together
You’ve got stuck in a moment
And now you can’t get out of it
Don’t say that later will be better
Now you’re stuck in a moment

And you can’t get out of it”  - From U2 “Stuck in a Moment“

Too many were burned by advisor or lost money in the stock market or took a chance and got their heart broken.  Whatever setback that came, what did you learn?   Yes, there was pain.  Yes, it was real.  But growth happens through pain and certainly when we face setbacks.   But too many people let failure prevent them from moving forward.  They get “stuck in the moment”. Click here to read more »

Your Stories

The past two weeks I have been busy collecting your stories.  We received hundreds of them!  The question was: how was 2009 for you financially?

Here are some of your responses:

“I don’t know how we are even still standing.  The only thing that i have is my faith in God and Jesus as my savior.” – N.A.

“Jay, Thank you for educating me on faith-based investing.  I have been following your picks and made a ton of money in a poor economy.  Thanks again, looking forward to 2010!”  – E.M.

“2009 was the worst year of my life!” – R.S.

“Are we there yet?  I couldn’t wait for 2010 to start so I could never again look back at 2009.  What a disappointment!”  – D.L.

“Despite a rocky start in 2009, the Lord blessed me in so many ways, maybe not so much financially as spiritually.  I am truly content.”  – L.B.

“God is good!  2009 was a decent year financially.  Thanks to you and your newsletter I finally took some action!” R.G.

Thanks everyone!  I will share more stories next week.  May God bless each and every one of you this year! 

I wanted to share a few good posts from this week

From Michael Hyatt, CEO of Thomas Nelson:
“Why aren’t you dead, yet?

From my blog:
“Who’s protecting your blindside?  Do you have financial accountability?”

From Bob at ChristianPF.com:
“John Rockefeller on Tithing”

Donald Miller:
“Living a good story, an alternative to New Year’s resolutions”

Your vision is extremely important for success. In order to properly manage wealth, you need to identify your core values and priorities.

This vision will direct and affect all areas of your life, including your finances. What motivates you becomes your burning passion. This burning passion drives your success. If your passion is lukewarm, so, too, will be your results. Click here to read more »

Win or Perish?

There is a Viking legend backed up by actual historical data, that long ago, a great warrior faced a situation where surrendering in battle was not an option. Yet he and his armies faced a very powerful foe. They were significantly outnumbered and “had no chance”. After sailing to the enemy’s country, the warrior chief unloaded his soldiers and equipment, and then had every one of their ships burned to ashes. Addressing his men before the battle, he is reported to have said, “Do you see our boats going up in smoke? There is no retreat. We win – or we perish!” Legend has it that each soldier fought harder than he ever had before in his life, and they won against great odds. Click here to read more »

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.