Over the last few months I have had several conversations about portfolio stratagies with both registered reps and individual investors. It seems to me that the overall concensus among reps is that buy-and-hold is the way to go. Their logic is simple. Over the long run the market ultimatly goes up. Over the last 20 years the average has been around 12% a year and close to 7% per year sense the American markets have started. Most reps hold on to the belief that if you just hold on to the stocks that you own they will eventually increase in value. Actively managing these stocks (buying and selling based on the market) could cause you to miss the best trading days of the year.

On the other hand, proponents of Active Management claim that they don’t have centuries to invest. Most people invest for less than 30 years, and they can’t afford to retire when the markets are down 10-20%. So they watch the market and make trades based on signals. If they miss the best trading days of the year, that’s OK, they also miss the worst. The down side to this approach is that the investor needs to make a higher percentage on the stock to offset the trading fees.

Buy-and-Hold is the traditional favorite of the professionals but I’m wondering if the current market conditions are making them change their mind. In order to recover from a 50% loss (which is what many investors experienced this year) you need to make 100% on what you have left. At the market average of (roughly) 7%, this would take 10 years. Now consider the number of people that will retire in the next 10 years. Do you think it is still better for them to buy-and-hold their investments (even if they’re in conservative portfolios) or would it be better for them to cash out with what they have and wait for the market to start recovering?

In the last few posts we’ve covered tough questions relating to stocks and bonds. I’d like to take a break from talking about investment vehicles to respond to one of the most asked questions and most popular assumptions in regard to Biblically Responsible Investing. The ever dreaded…

“Will I have to sacrifice returns to invest in accordance with biblical principals?”

Like I mentioned, this often comes in the form of a logically laid out assumption such as, “well if I limit the stocks that I’m allowed to buy, then I’ll miss a lot of opportunities that I would have had otherwise”. Before I respond to that statement or answer the above question, I’d like to address the biggest concern that comes to mind when I hear someone in that mindset. The first question I always have to do is, “Would you still invest in accordance with biblical principals if it meant that you would absolutely have to make lower returns with your investments?” What is more important? There are plenty of immoral or even illegal investing opportunities out there that will get you much higher returns than you could make in the stock market.  The point is, what is your first priority? Is it getting the best returns, or honoring God? In Matthew 6:24 Jesus tells us “No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money”. That last line, “You cannot serve both God and Money” is important for Christians to understand. No matter what we do, or how hard we try to avoid it, at some point, our priorities are going to come to a test. We are going to have to choose between the things that we have chosen to make most important to us. Investing may be one of those times. We may have to make a choice between doing business the way God instructed us to, or the potential of greater returns. So what is the right thing to do?

Matthew 6 is one of my favorite chapters in the entire bible when it comes to God and money. Jesus sums up in a couple of short paragraphs many of the key themes that we need to remember about how God cares for us. Matthew 6:31-33 says, “So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ for the pagans run after all these things, and you’re heavenly Father know that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well”. We need to remember that God is going to take care of us and that worrying about losing returns is secondary to seeking his kingdom and righteousness. Remember, God knew how much money you would have to invest, and which way the market would move on any given day, when he gave us his rules of money. He didn’t add in any exceptions for investing in immorality even though he knows the outcome of every stock and bond in every market in the world. So if God isn’t worried if you make lower returns with the money that he gave you, should you be? If you heart is so attached to the money that you’re investing that you’re being tempted to violate Gods rules, then maybe the stock market isn’t where you should have it invested.

Now that we’ve talked about the concerns that come to mind I’d like to answer the question. The answer is no, you do not have to sacrifice returns to invest in accordance with the bible. In fact, according to US News.com, The Timothy Plan, an evangelical Christian mutual fund company, is well out performing the S&P 500 with a five year annualized return topping 16 percent. They screen all of their holdings for alcohol, tobacco, gambling, abortion, pornography, and “anti-family entertainment”. In my experience, screening the immoral companies from your portfolio only eliminates 30 to 50 percent of publically traded companies. There are still thousands of financially sound investments available. Of course there is no telling how long any fund will continue to make profits. Look at the bottom of any brochure or advertisement that has a graph of a stock or funds performance and you’ll always see the same disclaimer, “Past performance is not indicative of future results”.

So the good news is, no, you don’t have to sacrifice returns to invest in accordance with your faith but the more important thing to remember is that it wouldn’t matter if you did. God gave us extensive rules on how he wants’ money handled here on earth along with the order that we are to “seek first his kingdom and his righteousness”, (Matt 6:33). Like everything in the Bible, when interpreted correctly, these orders will not contradict each other.

Yesterday we started a conversation about the tough questions that are asked about Biblically Responsible Investing. For the most part, the questions focused around investing in stocks. Today I’d like to talk about a few more questions that apply.

Ok, if buying a stock is buying ownership in a company, then I can see why Christians would want to avoid buying stock in certain companies. But what about bonds?

First of all, let’s cover exactly what a bond is. The Merriam-Webster Online Dictionary defines a bond as “an interest-bearing certificate of public or private indebtedness”.  Basically, a bond is a type of IOU issued by a government or company that says that if you lend them money, they will repay you what you lent, with interest, by a certain date (the maturity date).  With that taken into consideration, you can see how some of the conflicts with owning stocks in immoral companies would also apply to owning bonds. With a stock, you profit the company by buying a portion of the company for a set price, with a bond; you simply lend the company money with interest. You can see why we would want to avoid buying bonds from the same companies that we would want to avoid buying stock from.

For the sake of explanation, I’m going to give a very cut-and-dried example for both to make it clear where the conflict lies.

Say for a moment, that you were looking to financially invest in a movie studio that produces children’s movies. We’ll call it “Studio KID”. Studio KID has both stock and bonds available for purchase.  Upon closer examination you realize that the Studio KID has a branch (called “Adult Filmz”) that produces only hard-core adult entertainment on DVD and the internet. Even though it goes by a different name, Adult Filmz is owned by Studio KID and Studio KID manages and runs Adult Filmz. As a Christian, is it a biblically sound investment to buy stock in Studio KID? If you read yesterdays post then you know that the money you use to buy the stock will either directly or indirectly profit Studio KID (and therefore Adult Filmz) and not only that but you will also be an owner of Studio KID (and therefore Adult Filmz) and you profits will be made primarily due to the actions of that company. This is a problem (see Ephesians 5:11)

But what about bonds? If you buy bonds from Studio KID then you will be lending them money to use at their discretion.  The money would benefit both Studio KID and Adult Filmz, and the interest that is earned on the bonds is made from the sales and advertising profits of both studios. The same scripture that applied to profiting from immoral stocks yesterday, applies to bonds today (Deuteronomy 23:18, Ephesians 5:11).

So after breaking it down we can see that stocks and bonds pretty much go together in the sense that if it would be wrong to invest in a company’s stock, then we should probably avoid buying that companies bonds as well. But there are some circumstances where that rule won’t work. I’m talking about government bonds.  The U.S Government does not sell stock to the American people, but it can raise money by issuing bonds. This goes for state and municipal governments as well.. Most governments would never pass a moral screening. They give money to support abortion clinics, manufacture weapons of mass destruction, and profit from the actions of every company in America, good or bad (taxes). Some would say that any financial investment in any U.S. government would violate everything that the bible says about stewardship and honoring God with our finances. In some cases, that may be true. While the government does use bonds to raise money for unspecified uses (such as treasury bonds) they also issue bonds for specific projects. These bonds make it much easier to ensure that the money you lend is not going to make its way into Planned Parenthood’s yearly government grant. One of the key questions we need to ask before buying these bonds is what is the money going to be used for. Bonds for road projects or to build a state park could be considered morally neutral (depending on the details) and could be a good financial investment. But it’s important to know the details before making your decision.

Once you have the information you need, you only need to be sure that the money that our master has entrusted you with is being handled according to his orders. If you’re unsure if a company is involved in immoral actions, then your best bet is to either contact someone who can find the information for you, or play it safe and avoid investing in that company. Also, if you hire an investor to choose stocks for you, be sure to ask what software or information he uses for moral screenings and what all he is screening the companies for. If you not confident that he is investing with your Christian convictions in mind, then be sure to find someone who will. Remember, it’s not your money that your having invested. It’s the Lords,(Deu 10:14, Hag 2:8, Psa 50:10-12)  and he’s entrusted it to you to be faithful with (Corinthians 4:2, Luke 16:12).

It’s difficult to explain to my friends and family (in-laws especially) exactly what I do for a living. Not because I’m ashamed, but because there isn’t really an established job description to fall back on. Most people will get the gist of what you do if you tell them that you’re a computer programmer for a financial firm or an accountant for a retail outlet, but telling them you run Moral Money for a living usually requires a little more explaining and often times the conversation leads to some pretty tough questions.  It usually goes something like this:

Friend: So what exactly do you do for a living?

Me: I run a website called MoralMoney.com.

Friend: What’s that?

Me: It’s a specialty website that offers free information about Biblically/Morally Responsible Investing to Christians.

Friend: What’s Biblically/Morally Responsible Investing?

Me: It’s making sure that your investments line up with your beliefs.

Friend: *Shrugs* *raises one eyebrow*

Me: Ok, as a Christian, you probably wouldn’t want to make a living by profiting off of abortion or pornography. We find out what companies are involve in biblically immoral activities and offer it to the public so that they don’t unknowingly end up with one of those companies in their portfolios

Friend: Why does it matter? It’s just an investment. You’re not working for them or supporting them. You’re not even taking an active role in the company. You’re just using the company stock to invest for retirement.

Me: Well, what is a stock?

Friend: What do you mean?

Me: A stock certificate is a certificate of ownership that a company issues to raise money. Everyone who owns stock in a company is an owner in that company and has a say in the actions of that company. The money that is used to purchase the stock, whether directly or indirectly goes to support that company financially. The value of the stock, whether it rises or falls, is due, primarily, to the actions of that company. Just because you take a passive stance on investing and choose to waive your right to vote on company policy, doesn’t mean that you’re not an owner of that company and that your profits aren’t from the actions of that company.

You can see how things get complicated pretty quickly. From here, things can branch off into several areas. Sometimes they ask “What about bonds?” sometimes they say “What am I supposed to do? I only own a couple of shares?” occasionally there’s the “ok, that makes sense. So what exactly do you do again?”. But for the purposes of this post I want to take the conversation to the “But the purpose of investing is making money. God wants us to be good stewards so I don’t think it matters what companies we invest in” response.

What does the Bible say about this? Well, to start from the beginning, Jesus uses illustrations about investing for financial gain several times in his teachings (Matthew 25:14-29; Luke 19:12-26). While this doesn’t directly teach us that we should invest, it does suggest that he approves of wise investments and certainly indicates that he doesn’t forbid investing.

Now we need to understand that investing doesn’t just bring profits to the investor, it also profits the company that we have invested in. As Christians, we should not be attempting to profit from people doing what they shouldn’t, nor should we be partnering with companies who do. Ephesians 5:11 tells us “Have nothing to do with the fruitless deeds of darkness, but rather expose them”. How can we justify investing in companies who profit by marketing “fruitless deeds of darkness”?

In Deuteronomy 23:18 God gave the Israelites the command “You must not bring the earnings of a female prostitute or of a male prostitute into the house of the Lord your God to pay any vow, because the Lord your God detests them both”. This makes it clear that God does care where our money comes from and does not want “dirty money” in his temple.

But does God care if you don’t know where your money is invested or if you just give your money to a professional investor to make the stock picks for you? The answer is again a resounding yes! First of all, this is a violation of our commands to be good stewards. A good steward always takes the necessary steps to know where his master’s money is invested. As stewards, it is our duty to ensure that anyone that we entrust our masters money with is going to invest it in accordance with our master’s orders. This means choosing investors that have the ability to choose companies that do not involve themselves with biblically immoral products or actions.

In the next few posts, I will be exploring some of the most popular questions about Biblically Responsible Investing and taking them to the bible to find solid answers. If you have any questions you would like explored or you have biblical information for or against any of my conclusions, please feel free to let me know. I’m always open to new opinions.

Growing up in south St. Louis only a few miles from the Anheuser-Busch brewery, the moral implications of drinking, and alcohol in general, have always been of particular interest to me. The brewery is one of St. Louis’ most loved landmarks (next to the Gateway Arch) and one of particular pride to St. Louisians. That’s why I don’t often admit that I have never owned any Anheuser-Busch stock. You may ask what the big deal is; a lot of people don’t own stock in companies just because they are local. Well then, you didn’t grow up in St. Louis. In 2008, when Inbev, a foreign brewery company, started its takeover of Anheuser-Busch, around here, it almost became less of an issue of municipal pride and more an act of patriotism to buy stock in Busch to try to stop the buyout. Unfortunately, the buyout moved forward, unhindered by the attempts of angry St. Louisians to save the brewery from the evil clutches of a faceless foreign corporation.

So why would I avoid owning stock in a local landmark that provides thousands of jobs across the country just because it manufactures alcohol? Surly the Bible doesn’t condemn making, or drinking alcoholic beverages. Why then would Christians need to worry about the morality of investing in a brewery or distillery? This is a conversation that I have had many times, and argued on both sides of in the past with varying outcomes. Before I begin, I would like to mention that in this post, I am only concerned with the moral implications of owning stock in these companies. Whether it is financially wise to invest in any of these particular companies is a topic for another blog or for your financial advisor.

One of the first questions that need be asked is “would profiting from this company bring glory to God, or would it negatively impact my relationship with him”. I can find no scripture in the bible that indicated that moderate drinking in itself is a sin or in any way immoral, but I can find plenty of examples that show the disciples and even Jesus partaking in drinking alcohol both as a beverage for their meal, and to celebrate. In fact, Jesus’ first miracle was turning water into wine and ordering it to be taken to the master of the banquet for tasting. (John 2:6-8) If Jesus participated in not only drinking wine, but making it for others to drink, then is this really an industry that as Christians we should be concerned about investing in.

Before we go any further, I would like to show a quote from Moral Money’s “What We Screen for and Why” article that lists alcohol as one of the criteria that is avoided.

“Like tobacco and gambling, we do not believe that Alcohol in itself is a sin. The bible teaches moderation in this aspect. However, alcohol is a substance that has enslaved many people and has a greater potential for abuse then most other legal substances that are easily attainable. Due to this, and the fact that alcohol producing companies promote their products by glamorizing immoral behavior and anti-Christian lifestyles, we choose not to support these companies.”

It doesn’t take much investigating to understand that the reason most breweries and distilleries are screened out by Moral Money isn’t because of the alcoholic content of their products but by other more general categorizations. Alcohol is an easily addictive substance that is easily accessible. Alcohol abuse is linked to roughly 75,000 Americans each year and is the third leading cause of preventable death according to a U.S. Government study. While most of these deaths were caused by mishaps, such as car accidents, due to excessive alcohol use, 34,833 of those people in 2001 died of Cirrhosis of the liver, cancer and other diseases linked to drinking too much. While personal responsibility plays heavily into this, the fact is that alcohol is addictive and can lead to many different fatal diseases. Not a healthy combination in a society that is prone to excess.

Another aspect to consider is that many companies that produce alcoholic beverages also promote and glamorize immoral lifestyles through their advertising. While there are many beer commercials that I approve of, and actually enjoy, we have to consider the ads that these companies are placing in magazines and at live events. What are their advertising dollars supporting and what kind of lifestyle are they trying to equate with their product? Most of us don’t see (and don’t need to see) the ads that are placed in the crudest magazines or at the Marti Gras festivals but they still need to be considered.

So alcohol in itself is not necessarily the criterion that causes these companies to be screened as immoral investments. In fact, it may be true that there are alcohol producing companies that do not pour their advertising dollars into suggestive advertising or contributing to irresponsible or immoral behaviors. Many have even set up rehab facilities to help addicted patrons. Unfortunately, because of the overwhelming tendency for the alcoholic beverage industry to lean heavily toward the immoral, the health considerations, as well as the desire of much of the Christian community to avoid these issues in their investments, we felt that it was called for to include this industry in our screenings.

If you are still interested in investing in companies that produce alcohol, then I would recommend doing your research. Call and find out what magazines they advertise in and how they promote at live events. If you don’t find anything that you would consider wrong, then I wouldn’t see any reason not to invest just because they manufacture alcohol. If there is anyone who thinks differently about any of this, I’m always open to your comments. Like I said earlier, this is a discussion that I have had many times and have been on both sides of.

For those of you who have been to MoralMoney.com before, you may already understand what is meant when I use the term Biblically Responsible Investing or BRI. For anyone who doesn’t, BRI can go by many names including, Faith-Based Investing, Christian Investing, or Morally Responsible Investing. I simply choose to use the term “Biblically Responsible” because I want to be sure that people reading understand that we are talking about investing in accordance with the morals established in the Bible as opposed to the Koran (it may seem like an unnecessary distinction to many but the largest “faith-based” mutual funds right now are based on Islamic values)..

Definition

Biblically Responsible Investing (BRI) is the act of abstaining from investing in companies that produce or promote certain products or lifestyles that conflict with the morals taught in the bible. This means that if a company produces products that are contradictory to the Christian lifestyle, such as pornography, or supports companies that do so, such as Planned Parenthood, who provides elective abortion services, then investing in that company is avoided.

Stewardship

BRI is practiced for several reasons. The first is the understanding that God is the true owner of everything we have, including our money, and that he has entrusted it to us as his stewards to use for his will. There are many biblical references to this, including the verses below.

“Behold, to the Lord your God belongs the earth…and all that is in it” (Deuteronomy 10:14
“The earth is the Lord’s and all that it contains” (Psalm 24:1)
“‘The silver is Mine, and the gold is mine’ declares the Lord of hosts” (Haggai 2:8)

The parable of the good servant in Matthew 25 shows us that God appreciates and acknowledges appropriate and responsible use of the resources he gives us and despises the careless use of them. With that in mind, how we spend and invest the resources that God has entrusted to us is not a decision to be taken lightly. How much to give, how much to use to take care of your family and how much to save and invest for a future purpose are all questions that should be asked and prayed over. For many people, including born-again Christians, once those questions have been answered and they have decided what portion of their resources to invest, they forget to include God in the investment process. This may be because there is a common belief in the business world that the only purpose of investing money is to make money. Unfortunately, for Christians, this is not the case. Our first concern in investing, like everything else in life, is to honor God through our actions. This does not mean that growing our investments is not important. This simply means that, as stewards, it is our first duty to ensure that we are not compromising the values that God has given us to live by.

Ownership

When you purchase stock in a company, you receive ownership over a certain portion of that company. If the company is one of those mentioned above then you may have quite literally chosen to grow the finances that God entrusted you with by buying part of an abortion clinic or pornography studio. That’s a little more of a clear cut example then many of the situations that could be faced but it illustrates the importance of taking the time to be aware of what you are investing in.

Even if the company you are buying doesn’t produce immoral products, that doesn’t mean that it’s not participating in them. Companies, just like individuals, support many causes. If the software company that you own is supporting Planned Parenthood, the number one provider of abortions in America, or promoting movies that glamorize pre-marital sex or violence, then can we as Christians justify financially participating in those actions in order to fund our retirement account.

Our Responsibility

In 21st century America, it has become common place to invest through retirement plans or to trust our retirement to professional advisors while taking little responsibility ourselves to find out what we are invested in and what those companies support. But I believe that it is our duty as Gods stewards to educate ourselves and to make responsible choices that do not compromise our faith in any area of our lives including investing. Whether this means taking a more active role in what companies or funds we invest in, finding an investor that shares our beliefs and will avoid putting our money in immoral investments, or just sticking to morally neutral investments such as gold or commodities, it is important that we ensure that we are being good stewards over that which we have been entrusted with. In this way we are able to honor God by acknowledging him as our master and provider in the hopes of being welcomed into his joy as a good and faithful servant

Anyways….

There are a few verses above that I believe support BRI, but I also believe that the Bible has a lot more to say on these topics. This post is just intended to be a brief overview of what BRI is and why it is important to Christians. I’d be interested to hear if any of you think this is biblically supported at all or if it’s just “food offered to idles” (1 Corinthians 8 ). I’ve heard some good points on both sides but, as you can tell from this post, so far I think the pro-BRI side has more pull.