Faith Based Investing

Matthew 6:24 reminds us all we cannot serve two masters: God and mammon (money). But Proverbs 28:20 emphasizes the blessings that will come to all faithful men, as long as he does not commit his entire existence to becoming rich. This delicate balance is not difficult to accomplish, since high-risk investments are, for all intents and purposes, gambling. Precious metals are an excellent hedge against inflation and an integral part of a diversified portfolio. The other low-risk, potentially high-reward investment few Americans have even thought about is the foreign exchange market.

A G20 Summit was held in Moscow last month in an attempt to quell the ongoing and increasingly volatile currency wars happening all across the globe. Japanese Prime Minister Shinzo Abe was the primary focus of the meeting, which brought together the finance ministers and central bank governors of 20 countries that control 90 percent of the world’s economy. Abe has already ordered the Bank of Japan to print 12 trillion yen in early January, which immediately caused the Japanese currency to drop to a near 30-month low against the dollar.

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REVERSE MORTGAGES RECONSIDERED

Often criticized, these loans are getting another look.

Is a reverse mortgage worth it? Before this last recession, couples who asked their retirement advisors if they should get a reverse mortgage were often given a quick answer: “No.”

Today, the answer to that question might be “yes”. In an environment with minimal interest rates, these loans can offer retired homeowners a source of tax-free cash, either in periodic payments or a lump sum. (A HELOC is also possible.)

How does it work? A reverse mortgage allows you to borrow against your home equity while retaining ownership of your residence. Many of these loans have variable rates, consequently permitting different payment options.

Reverse mortgage balances increase with time, as there are no monthly payments to reduce principal as in a “forward” mortgage. The loan doesn’t have to be repaid until you move out of the home or pass away. At the time of repayment, the amount owed will not exceed the home’s value – but when the loan becomes due it must typically be paid in full, including interest and closing costs.

What are the qualifications? You must be 62 or older to get a reverse mortgage. You also have to own your home free and clear, or have a mortgage balance that can easily be paid off using funds from the loan. In addition, you must keep paying property taxes and homeowners insurance and maintain your residence with needed repairs to avoid defaulting on the loan.

Why not get a reverse mortgage? These products have gotten a bad rap for many reasons. At first, they were seen as loans of last resort. If you were up in age and close to outliving your money, they could give you needed income.

Then the perception of reverse mortgages began to change, thanks to marketing. Commercials for these loans appeared everywhere, with celebrities hawking them as a cure for retirement income woes. Sixty-something homeowners liked the pitch and signed up – but today, some wish they had studied the fine print.

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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 »