Once upon a time…

A young man wanted to build a house. He had never built one before and didn’t know quite what to expect but he knew that this would be the house he lived in with his family for the rest of his life, and that it would continue to shelter his family after he was gone.  Because this was such an important undertaking he decided to get some advise.

First, he went to the lumberyard to ask the Lumberjack what he should build his house out of. The Lumberjack listened to what he needed in the new house and explained to him how lumber was the best choice for all his needs. He had a very compelling case. Lumber was strong, a natural insulator and cheap enough to be replaced as needed. A lumber house could meet all of his needs.

 His mind was pretty much made up but because this was such an important project he decided to go ahead and get a second opinion. So he went to the brickyard and told the Bricklayer what he needed in a house and asked what he should build it out of. The Bricklayer listened intently and considered the mans need. After a few moments, the Bricklayer explained how the only way the man would get everything he needed out of a house was to build it with brick. The man listened to his advice and saw that he had a very good point. Brick is very strong, waterproof, can endure the elements and lasts a very long time. A brick house could meet all of his needs.

His mind was made up but just to make sure, he thought he would get one more opinion. He went to the Masons shop and told him about his dilemma. The Mason listened intently to the mans story then told him that his best bet was to build his house from stone. It was long lasting, very very strong and always available. The man had finally made up his mind.

When the man went home that night he told his wife about his day. He was very proud of himself because he got the opinion of three professionals before making up his mind to build a house out of stone. His wife thought for a moment and asked him, “Dear, are you sure you spoke to the right professionals”? “What do you mean” he asked. She answered, “It seems to me that a bricklayer would be an expert on bricks, and a Mason on stone, but none of these professionals are true experts on building a house”. The man stopped and thought for a few moments about what his wife had said and then asked her, “But who would I ask about building a house”? “Why, an architect of course” his wife answered.

The man knew his wife was right and set off the next morning to see an Architect. The man explained everything he needed in a house and how he wanted the house to take care of his family after he was gone. The Architect listened intently and explained to him that for a house to do everything the man wanted it to, it would have to be built of wood, brick, stone, steel, aluminum and many other materials. He worked with the Architect to ensure that the final design met all of his requirements and the Architect offered his advise on several areas that the man had not considered. When all was said and done, the man not only had a very well thought out plan for a house that met all his needs, but he also had someone to go to when things in his life created changes in his plans.

Soon after, the man and his family built their new house with the help of the Architect. And they all lived happily ever after.

THE END

While this story was obviously fictional, the message is something that we can easily apply to our finances. When getting advise on financial matters, be sure to ask the right people. I have had many meetings with insurance agents, mortgage companies, investors, and tax accountants and all of them seem to know exactly what I need to make sure that my financial planning needs are met and that my family will be taken care of when I’m gone. However, I’ve found that the best financial plan incorporates more than just an insurance agent or mortgage broker can offer. A full financial plan requires a full financial architect. Someone who is knowedgable  in many, if not all areas of personal finance.

Be sure you know what areas your financial advisor is fluent in before you trust your families future to his planning and advise. And beware of the roaming insurance agents who knock on your door and claim to be able to help you protect your families future. They may know their trade well and make a convincing case but be sure you get some advice from an architect before you make your final decision.

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?

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.

As Christians, we hear the word stewardship a lot. We are told that we are the stewards of the wealth that God has granted us but how many of us really know what a steward is. Ben Patterson states in his book, “The Grand Essentials”;

“A steward is someone entrusted with another’s wealth or property and charged with the responsibility of managing it in the owner’s best interest.”

The first time I read that sentence it seemed to me to be exactly what I had always assumed a steward was. But after reading it a few more times something struck me.  A steward is “charged with the responsibility of managing it in the owner’s best interest”. After some thought, I had to apply that to my own life. Have I really been managing the money and possessions that God has entrusted me with in HIS best interest, or have I merely been using what he put me in charge of to better my own lifestyle and fund my own retirement while saving a few scraps for the less fortunate so that could give some of the glory to God?

That thought brought to mind the parable of the ten minas in Luke 19:11-27.

A man of noble birth went to a distant country to have himself appointed king and then to return. So he called ten of his servants and gave them ten minas. ‘Put this money to work,’ he said, ‘until I come back.’ But his subjects hated him and sent a delegation after him to say ‘We don’t want this man to be our king. He was made king, however, and returned home. Then he sent for the servants to whom he had given the money, in order to find out what they had gained with it. The first one came and said, ‘Sir, your mina has earned ten more.’ ‘Well done, my good servant!’ his master replied. “Because you have been trustworthy in a very small matter, take charge of more.’ The second came and said, ‘Sir you mina has earned five more.’ His master answered, ‘You take charge of five cities.’ Then another servant came and said, ‘Sire, here is you mina; I have kept it laid away in a piece of cloth. I was afraid of you, because you are a hard man. You take out what you did not put in and reap what you did not sow.’ His master replied, ‘I will judge you by your own words, you wicked servant! You knew, did you, that I am a hard man, taking out what I did not put in and reaping what I did not sow? Why then didn’t you put my money on deposit, so that when I come back, I could have collected it with interest?’ Then he said to shoes standing by, ‘Take his mina away and give it to the one who has ten minas.’ ‘Sir,’ they said, ‘he already has ten!’ He replied, ‘I tell you that to everyone who has, more will be given, but as for the one who has nothing, even what he has will be taken away. But those enemies of mine who did not want me to be king over them – bring them here and kill them in front of me.’   (Luke 19:11-27 NIV)

After reading this I have to admit that even thought I knew what the definition of a steward was, there was a part of me that was translating it poorly into practice. While I’ve understood that the things I have were not mine, I tended to treat them more as a business expense account then the Lords personal belongings. I take some out of the account to afford my lifestyle along with the occasional cost of living raise needed to maintain my standard of living, all while making sure that there is still enough left to give some to the Lords work. I take from the account believing that it’s alright; the Lord owns everything so there is more where that came from, giving little thought to the fact that my habits and responsibilities are constantly being evaluated and taken into account for what I will be entrusted with later. It’s easy to recognize that what we tithe and give away is the Lords but we don’t always remember that the money we use to support our families, the cars we drive and the house that we live in are also the Lords. He gives it to us so that we can glorify him through our management of his belongings and he will reward us, or not, for our management of those belongings when we give an account to him.