To Do List Image

Bear Market “To Do” List – P.E.A.C.E.

Peace I leave with you; my peace I give to you. Not as the world gives do I give to you. Let not your hearts be troubled, neither let them be afraid.

John 14:27

As a follow-up to my piece, Troubles, a few weeks ago, I offer you some of my further thoughts on navigating the current market environment as a biblically responsible investor.

From an economic perspective, the Coronavirus pandemic is both a demand-shock and a supply-shock. So, as opposed to a significant hurricane or blizzard or even the 9/11 terrorist attack, this exogenous event may not simply push back economic activity, but rather may actually destroy it. Therefore, it is highly likely we have already entered a recession. Monetary and fiscal stimulus are critical components for an economic recovery. They must be done. However, in and of themselves, these economic policy levers are not enough. The new health concerns that have emerged must be addressed over the coming months, into the next flu season, and for years thereafter. Further, consumer and business confidence must be restored. This will simply take time and there are no short-cuts around it. Lastly, while we all long for a return to “normal,” it is likely that when we do emerge from this crisis (and we will!), life and the economy will be different than it was before. Specifically, our day-to-day lives and the economic environment will be changed in terms of travel, social interaction, entertainment, health care, the social safety net, politics, globalization, etc.

As we face these challenges, we must remember that it is buried very deep within our human nature to want to take action in the face of adversity. Especially in times like these, our natural behavioral instincts (incl. survival and herding) activate into high gear and we rally under the banner of “Don’t just sit there—do something!” Against that instinct, however, the Bible gives us the challenging guidance to “Be still, and know that I am God” (Psalm 46:10). It is almost as if our command as believers is counterintuitively to “Don’t just do something—sit there!”

In our hearts, we know that this is wise instruction, but it is a tough pill to swallow as the stock market plunges. Fortunately, most investment experts wisely support this concept of prudence by advocating a mindset of calmness, resolution, and perspective. However, many times their advice is offered as a “To Don’t List,” e.g., “Don’t panic!” “Don’t sell!” “Don’t abandon your plan!” “Don’t capitulate!” or “Don’t liquidate!” All these are wise guidelines, but they go against our very strong human reflex to actually do something!

Therefore, in contrast to a “To Don’t List,” I share with you a list of proactive actions that can be taken by investors right now. This is based on my 35 years of investment experience, but equally on my 45 years of being a follower of Jesus Christ. This Bear Market “To Do List” is called “P.E.A.C.E.”

P.E.A.C.E.

Pray: Before anything else, let’s be sure to pray. Let’s be on our knees crying out to God for healing, comfort, and provision for those who have been affected by the Coronavirus. Let’s pray and fast in support of the global forces of human ingenuity, science, and wisdom being brought to bear against this modern-day pestilence. Lastly, let’s pray that through this adversity, many will come into a personal relationship with God. Praying is something we can “do.”

Engage: Engagement is something that we can definitely do in this environment. Even if they are not afflicted by the Coronavirus, so many around us have been impacted adversely. Within the proper protocols of “social distancing,” let’s engage with our family, friends, and community who need our assistance—neighbors who need to be checked on, seniors who need some shopping done, or maybe some health-care or emergency-services workers who need help with their out-of-school children. Let’s look for ways to support local businesses and their employees who are suffering dramatic downturns in their revenues. How can we support those in our communities who are most economically vulnerable? Engage is something we all can “do.”

Assistance: Unfortunately, economic downturns often lead to a significant decline in charitable giving—just when the needs are at their greatest. Therefore, something that we can “do” is to maintain, if not even increase, our donations to our church, community organizations, medical-research charities, etc. They need it now more than ever. Assistance is something we all can “do.”

Cash: In all market environments, bull and bear, one essential thing that investors must “do” is ensure that they hold an adequate amount of cash. This cushion mitigates the risk of having to “sell into a hole” during a market downturn when money is needed to cover expenses. Most financial planning experts recommend that anywhere from 6 to 24 months of living expenses be held in safe, low-yielding cash, savings, or money market accounts. If an investor does not currently have that amount of money set aside, then now is the time to do it, even though the market has sold off so dramatically. However, even in such a volatile market environment, investors should be cautious about holding too much cash, especially with current interest rates so low. Remember that at 0.25% per year, an investor is on course to double her money in 288 years! Having the right amount of cash—not too little, but not too much—that is another thing that investors can “do” in this market environment.

Ease into the stock market: In these trying times, our “fight or flight” instincts are particularly pronounced. So while many investors are grappling with their “flight” impulses, others are engaging with their desire to “fight,” i.e., buy at these significantly depressed levels. Sometimes this is likened to trying to catch a falling knife. From our perspective, the stock market’s downside risk is still substantial. However, at -30% from the all-time high and with valuations much more attractive now, we believe that we are likely closer to the bottom than the top. Further, being a provider of investment capital in such dire times also meets a higher, noble purpose. Therefore, what investors can “do” if they have cash ready to be deployed is start easing into the market. A “dollar cost averaging” (DCA) strategy is a good method to minimize the emotional toils of a turbulent market by committing to invest a set dollar amount on a predetermined schedule, come what may. For those investors who are already fully invested, there is still something that they can “do,” namely rebalance. In rebalancing, investors make adjustments to their portfolio at the margin to bring it back to its target percentage allocations. In other words, trimming down (not selling out completely) some of those investments in asset categories that have done relatively well (e.g., bonds) and redeploying the proceeds into asset categories that have done relatively poorly (e.g., stocks). These are some prudent things that investors can “do” to ease into the stock market in the face of the sell-off.

In conclusion, I urge you to keep the faith as you grapple with your “To Don’t” and “To Do” lists under these stressful conditions. It affects all of us! Even Paul wrote, “For what I want to do I do not do, but what I hate I do” (Romans 7:15)!

And when grip of fear tightens, just remember the promise we have received:

Come to me, all who labor and are heavy laden, and I will give you rest. Take my yoke upon you, and learn from me, for I am gentle and lowly in heart, and you will find rest for your souls.

Matthew 11:28-29

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA, is the Chief Economic Advisor for Inspire Investing. Previously, Dr. Davidson served as the Chief Investment Officer for Wells Fargo Private Bank, overseeing more than $200B in assets. Dr. Davidson holds a doctorate degree from the DePaul University’s Kellstadt Graduate School of Business with his research focus in Behavioral Finance.

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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Where Is God When Stock Markets Crash?

This past Monday, March 9th, 2020, the stock market had its biggest percentage-point drop since the Financial Crisis of 2008, with the Dow Jones Industrial Average falling 7.79% in just one day. In nominal terms, that is a loss of 2,014 points, the Dow’s biggest point drop ever. (Source: Wikipedia)

Furthermore, this historic one-day wipeout of stock market value came on the heels of losses greater than 10% over the previous two weeks, sending markets perilously close to official “bear market” territory, defined as a decline of 20% or more from a previous high.

This kind of market activity has many investors on edge, in a panic, as they recall painful experiences from previous market melt-downs in 2008, 2001 and 1987. And maybe 1933? Is anyone still out there?

But as Christian investors, what should our response be? As a people who have supposedly placed our faith and trust in God, we should be at rest knowing that God is good, He is in control, and we can trust Him- shouldn’t we? Yet we can be just as susceptible to panic and fear as the next investor on the street.

It is precisely at times like these that we need to remind ourselves, from the truth of Scripture, where God is when stock markets (and other things in life) come crashing down.

GOD IS OUR FORTRESS

When we find ourselves infected with fear and panic, Psalm 46 is a strong dose of good medicine,

God is our refuge and strength,
a very present help in trouble.
Therefore we will not fear though the earth gives way,
though the mountains be moved into the heart of the sea,
though its waters roar and foam,
though the mountains tremble at its swelling.  Selah
 (v. 1-3)

God indeed is our refuge and strength! He protects us, and He also strengthens us. In Him we need no other defense, and in Him the weak are made strong. Are you feeling exposed to danger? God is your refuge. Are you feeling helpless and weak? God is your strength.

REJOICE IN THE RIVER OF LIFE

There is a river whose streams make glad the city of God,
the holy habitation of the Most High.
God is in the midst of her; she shall not be moved;
God will help her when morning dawns.
The nations rage, the kingdoms totter;
he utters his voice, the earth melts.
The Lord of hosts is with us;
the God of Jacob is our fortress.  Selah
 (v. 4-7)

There is a river that makes glad the city of God, the River of Life which runs down from the throne of the Most High. Have you tasted of that River of Life through faith in Jesus Christ? If so, then rejoice and be glad! Your eternal soul is being kept by Him, and you have a portion in the “holy habitation of the Most High.” Nations rage and kingdoms will totter, but the Lord of hosts is with you. The God of Jacob is your fortress.

BEHOLD THE WORKS OF THE LORD

Come, behold the works of the Lord,
how he has brought desolations on the earth.
He makes wars cease to the end of the earth;
he breaks the bow and shatters the spear;
he burns the chariots with fire.
‘Be still, and know that I am God.
I will be exalted among the nations,
I will be exalted in the earth!’
The Lord of hosts is with us;
the God of Jacob is our fortress.  Selah
 (v. 8-11)

Look upon the works of the Lord, and remind yourself of His might and power! He alone has the power over desolations and wars, weapons and warriors. Know that He is a sovereign God, and let that knowledge bring you peace. God will be exalted over all the earth! The Lord is with you, and He is your fortress!

Your investment account may lose value—maybe even a lot of value in times like these. But remember who He is who allows it to happen, who is in control of the ups and downs of the market and your portfolio. Do not put your trust in the provision, but put your trust in the Provider. God does not promise to take care of your investment portfolio, but He does promise to take care of you. And that is really all we need to know.

Market Troubles

Trouble

“In this world you will have trouble. But take heart! I have overcome the world.”

John 16:33

While the Bible does not speak specifically about Coronavirus outbreaks or stock market plunges, it certainly does speak about plagues and pestilence, as well as periods of adversity and trouble. So, with that in mind here are some thoughts on the recent stock market sell-off from the vantage points of investment history, behavioral finance, and biblical wisdom.

In my many decades of investment experience, I have seen my fair share of market turbulence and even many “crashes”. During my career, there have been all matter of reasons to spark stock market sell-offs, however, this is the first time in my experience that a pandemic scare has been the catalyst for a significant stock market plunge. Yes, in the past, investors have expressed worries about health-related issues (Ebola, SARS, etc.), but nothing medical that I can remember has had the sort of impact that we are currently seeing. Not being a medical expert (although I am a “doctor”!), from my limited perspective, it seems that the pandemic concerns have legitimacy and therefore the potential to cause significant human and economic damage. While we may have some feelings of despair in the face of this challenge, as Christians, we can pray with confidence to God that the coordinated global forces of human ingenuity being brought to bear on this calamity will prevail. Even with that envisioned success, however, going forward, this new type of risk, global health, will now be a top-of-mind concern for investors for years to come.

While, most importantly, caring for and praying for those who have been afflicted (“Weeping with those who weep” – Romans 12:15), prudent investors nevertheless do need to consider the market implications of this medical emergency.  Stock market corrections (generally viewed by investors as the S&P 500 being down -10% from the prior high) are very common, coming on average every 11 months. Bear markets (generally viewed by investors as the S&P 500 being down -20% from the prior high) are less frequent, but still have visited investors on average every 44 months. With that context, it is important to remember that this 11-year bull market has been the longest in the history of the US stock market. That combined with recent all-time stock market highs, stretched valuations, record low bond yields, anemic economic growth, polarized political environment, and weak earnings growth, the probability of entering a bear market is material.

However, just because there is a heightened risk of a bear market does not mean that investors should reflexively “bail out.” Biblical wisdom certainly supports keeping one’s cool in the midst of adversity: “Do not fear, for I have redeemed you; I have summoned you by name; you are mine” (Isaiah 43:1). Further, while not directly addressing investment timing decisions, the Bible has many admonitions about making predictions and attempting to know the time and place of events.

Additionally, the evidence of financial history demonstrates that a strategy of “timing” the market by getting out when the market appears to be trending down and then attempting to adroitly get back in when the markets appear to have bottomed is fraught with risk, not the least of which is the necessity of being “right” twice. Additionally, research studies from Dalbar indicate that while the historical annualized return of the stock market (S&P 500) over the past 30 years (ending 12/31/18) is 10.0%, the average mutual fund stock investor return during the same time period has been just 4.1%. The biggest contributor to that underperformance differential was investors’ failed efforts to “time” the market, oftentimes being sucked into the market’s euphoria near market tops and “buying high,” while subsequently succumbing to despondency near market bottoms and “selling low.”

So, what is a biblically responsible investor to do in these circumstances? If an investor has a longer term (> 5 years) financial goal(s), then continuing to have a meaningful level of one’s asset allocation in the stock market is a prudent strategy despite the current market turmoil. In fact, further stock market weakness would likely be an opportunity to deploy more money into equities, i.e., buying low when stocks are on “sale.” Further, investors should consider the current market dislocations as an opportunity to “rebalance” their portfolios by trimming down slightly those assets which have performed better (e.g., bonds), and redeploying those proceeds into the recently beaten down asset sectors (e.g., domestic and international stocks, as well as commodities). Lastly, and most importantly, biblically minded investors should strive to keep these heartfelt concerns of life in their eternal perspective, including John 16:33: “I have told you these things, so that in me you may have peace. In this world you will have trouble. But take heart! I have overcome the world.”

Sources: Standard & Poor’s, Inspire Investing, and 2019 Dalbar Quantitative Analysis of Investor Behavior (2019)​

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA, is the Chief Economic Advisor for Inspire Investing. Previously, Dr. Davidson served as the Chief Investment Officer for Wells Fargo Private Bank, overseeing more than $200B in assets. Dr. Davidson holds a doctorate degree from the DePaul University’s Kellstadt Graduate School of Business with his research focus in Behavioral Finance.

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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Heart and piggy bank

Matters of the Heart

“For where your treasure is, there your heart will be also.”

Luke 12:34

The keynote address of every graduation ceremony that I have ever attended can be generally summarized as “Follow your heart!”. This message is certainly wise and insightful council for the young graduates as well as for their family and friends in attendance. For example, when considering a vocational path, “follow your heart” makes good sense as you don’t want to be stuck in an unfulfilling career path. Likewise, when making decisions about educational, geographical, avocational, relational, and many other questions, it seems reasonable to follow one’s heart. However, when it comes to financial matters, “follow your heart” may not be the most prudent course. In fact, when it comes to things financial, a good rule might be to “listen to your heart” and then do the opposite!

The Bible contains hundreds of references to the heart. Interestingly, however, rather than being a source of direction, the Bible often times speaks of the heart itself needing to be directed and turned. Matthew 6:21 and Luke 12:34 both describe how the heart goes to where one’s treasure is kept. 2 Thessalonians 3:5 asks that the Lord may “direct your hearts to the love of God and to the steadfastness of Christ.” Further, Luke 1:17 describes “the spirit and power of Elijah to turn the hearts of the fathers to the children, and the disobedient to the wisdom of the just”. While there is no question of the importance the Bible places on matters of the heart, the heart itself might not be the best source of direction as it is in need of its own guidance. In fact, Jeremiah 17:9 cautions that “The heart is deceitful above all things, and desperately sick; who can understand it?”. Therefore, simply choosing to “follow your heart” might not be the wisest path.

Investors often rely on their heart as a source of direction for their decisions. They have a good “feeling” about the market or a specific stock. Or their “gut” may make them wary about the investment environment. Investors often panic when the stock market falls and become euphoric when stocks soar. However, historical evidence shows that investors’ sentiment is a very poor indicator of future market performance. In fact, many have come to view investor sentiment as a contrarian indicator for the market. The longest running (since 1987), most frequent (weekly) measure of investor sentiment comes from the American Association of Individual Investors (AAII). A 2013 report by AAII about its own sentiment survey concluded that “extraordinarily low levels of optimism have consistently preceded larger-than-average six- and 12-month gains in the S&P 500”. In the study of Behavioral Finance, this is a classic investor decision-making error as following one’s heart is a recipe for disaster when it comes to investing.

So, in summary, purposely direct your heart to the love of God and to the steadfastness of Christ. Follow it in those areas of life where it makes sense to do so. However, when it comes to investing . . . don’t listen to your heart!


 
Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA, is the Chief Economic Advisor for Inspire Investing. Previously, Dr. Davidson served as the Chief Investment Officer for Wells Fargo Private Bank, overseeing more than $200B in assets. Dr. Davidson holds a doctorate degree from the DePaul University’s Kellstadt Graduate School of Business with his research focus in Behavioral Finance.

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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Inspire CEO Answers A Reader’s Questions About Biblically Responsible Investing

The Christian Post recently published my article “Financial Obedience Is Better Than Sacrifice“, which deals with the idea that God cares about the morality of the source of the money that we give back to Him as an offering, as taught in scriptures such as Deuteronomy 23:18, and the implications for investors regarding the profits we earn from our investment choices.

In reply to this article, one reader posted a comment under the name “Christian Commenter” and expressed some thoughtful questions that I have found to be very commonplace among believers when first presented with the scriptural teaching around investment stewardship and biblically responsible investing (BRI). I know there are more Christian investors out there with these same questions, so I thought it might be helpful and informative for others who are just starting to explore God’s call to holiness in the area of finances and investing to share this conversation.

Following are “Christian Commenter’s” questions and my own responses. I pray these thoughts help you catch the vision and join the BRI movement along with our Christian brothers and sisters around the globe who are investing billions of dollars of God’s money for God’s glory and their joy in the biblically responsible investing movement.


“Christian Commenter”: While I agree with some aspects of this article, I continued to read with the following question in my mind: What connection does the author have to this topic? Finally, at the end, we see that the author is the CEO of a company that would benefit directly from what he is proposing. That is self-serving and becomes a written advertisement for his company’s services under the guise of a Biblical mandate.

Robert’s Answer: Yes, I certainly have a conflict of interest as I run a biblically responsible investing (BRI) company, and as you mentioned I am not trying to hide that fact in any way. However, I got my start in this industry at Wells Fargo Private Client Services with a rather cushy job serving high net worth families and was completely oblivious to the concept of BRI. It was only after the Lord hit me with a “road to Damascus” moment that I began investing completely according to BRI guidelines – at much personal cost and risk, I might add, as it required me to leave my position and all my income and job security without much to go on but a clear calling and conviction from the Holy Spirit. (You can read about my story here if you want to learn more about my journey). 

I would also add that just because I have a conflict of interest does not mean that the biblical teaching I am sharing is incorrect. Pastors preach the biblical mandate to give money to the work of God, which is clearly a conflict of interest as it benefits them directly, but that pastor is fulfilling his duty to preach faithfully the word of God and the Bible does in fact command us to give joyfully to the church. I would encourage you to examine the scriptures I mention for yourself in relation to investment stewardship and decide if what I am saying has any merit, despite any conflict of interest I might have.

“Christian Commenter”: Beyond that, though, let’s continue with the author’s reasoning and ask him this question: If it is wrong to invest in companies that hold to anti-Christian views, isn’t it just as wrong to work for those companies? Shouldn’t Christians be told not to work for them as well because their wages would be the same as the profits from investments?

Robert’s Answer: Great question! And the answer is “sometimes”. 

Should a Christian invest in a chain of strip clubs? Certainly not. 

Should a Christian work at a strip club? Certainly not. 

Should a Christian invest in an abortion drug manufacturing company? Certainly not. 

Should a Christian work at developing and manufacturing abortion drugs? Certainly not. 

I would hope there is no disagreement on these points. However, what about a more nuanced situation, like should a Christian work in the accounting department at Netflix, even though they sell a lot of pornographic movies? I believe there is no clear scriptural mandate that would prohibit a believer from working there, as long as their work was not directly related to the production or promotion of the “adult entertainment” that is widely available on that streaming service. (For the scriptural basis of this position, please read my discussion below of Romans 14 and 1 Corinthians 8 and 10).

But should a Christian invest in Netflix? Certainly not, because as an investor you are profiting from all of the activities that company is involved with, both good and bad, family friendly and “adult entertainment”, as opposed to an employee who is paid based on a limited scope and responsibility within the company related to their specific job. So, in the case of most businesses, Christians are free to work at those companies so long as their work on the products and services are not entering biblically immoral territory.

“Christian Commenter”: And, if it is wrong to invest in and work for those companies, isn’t it also wrong to purchase those products or services as well since Christians would be using their money to benefit ungodly positions? I’m interested in hearing the author’s position, or anyone else’s, concerning these questions.

Robert’s Answer: As mentioned above, it is not wrong to work at a company as long as your position does not directly involve you in biblically immoral activities. Likewise, Christians are free to be customers of companies such as Netflix, so long as the products and services they are purchasing are not immoral. Keeping with the Netflix example, Christians are free to be paying customers of their movie streaming service if they limit their viewing to good, family friendly content, including the many faith-based Christian films and shows on Netflix, but if they are streaming pornographic content, then clearly they are in the wrong.

In contrast, as an investor you cannot tell Netflix to only send you profits from the good movies and not the bad ones. So if you are an investor in Netflix, you make yourself an accomplice who is sharing in the profits of ungodly, sinful movies that lead people into sin and ensnare them in a wicked bondage to lust and adultery. The Bible clearly condemns profiting from immorality (see Deuteronomy 23:18, Proverbs 16:8 and other scriptures I referenced in the original article), which makes investment in such companies a no-fly zone for Christians.

The Bible Says

A good scriptural framework for this conversation is found in Romans chapter 14 and 1 Corinthians chapters 8 and 10, where Paul discusses the topic of food sacrificed to idols. Paul makes the point in these chapters that believers are free to purchase and eat the meat sold in the marketplace, even thought it was derived from idol sacrifice, “Food will not commend us to God. We are no worse off if we do not eat, and no better off if we do” (1 Cor. 8:8). But at the same time, he denounces idol worship, “You cannot drink the cup of the Lord and the cup of demons. You cannot partake of the table of the Lord and the table of demons” (1 Cor. 10:21), with the obvious implication that those who are responsible for actually sacrificing the meat to the idol and selling it in the market are involved in a sinful act of idolatry.

Similarly, Christians have liberty to be customers of businesses with murky aspects to them, as long as what they are purchasing does not involve them directly in biblical immorality (as in the case of adult entertainment, abortion, or other inherently sinful products and services). Likewise, it is problematic for a believer to invest in a company that sells immoral products because they are no longer the innocent consumer, but a guilty producer and profiteer of immorality.

Caveat Of Conscience

One additional caveat that Paul addresses in this regard is the issue of personal conscience. He states that even though Christians are free to eat meat sacrificed to idols, he acknowledges that some believers “through former association with idols, eat food as really offered to an idol, and their conscience, being weak, is defiled” (1 Cor. 8:7). For these believers, eating that meat would be a sin, as Paul states in Romans,  “But whoever has doubts is condemned if he eats, because the eating is not from faith. For whatever does not proceed from faith is sin” (Rom. 14:23).

With this in mind, we should remember that for various reasons God may place a conviction upon a believer’s conscience that should govern their personal behavior, though that conviction would not extend to all believers in the way that a biblical command would.

For example, a Christian who has a personal history with alcoholism or with alcoholism in their family tree may have a strong conviction not to drink alcohol. They also might have a conviction that they could never work as a waiter who serves alcohol or be employed at a winery, brewery or distillery, or could never invest in a company that derives any revenue from alcohol sales.

That Christian should abide by those convictions, but also acknowledge that their personal convictions do not apply to all believers. And more to Paul’s primary point in the Romans 14 and 1 Corinthians 8 passages, we believers who do not have such convictions should still be mindful of our “weaker” (Paul’s word, not mine) brothers and sisters who do have those convictions and should refrain from any activity that might cause them to stumble on their own personal convictions of conscience, even though we are free. We should never express our Christian liberty in a way that causes others to stumble, “But take care that this right of yours does not somehow become a stumbling block to the weak” (1 Cor. 8:9).

Love Above All

It is for this precise reason that at Inspire we exclude alcohol (for instance) from our portfolios. Personally, I have no problem drinking a beer or a glass of wine or investing money into a winery or craft brewery or something of the sort. However, I know that some of my brothers and sisters for personal reasons mentioned above do not want anything to do with the alcohol industry, and so we remove alcohol from our portfolios, among other things.

But while alcohol is an example of an industry that Christians can be free to invest in, the same cannot be said for other industries which are inherently sinful, such as abortion or pornography. Those areas are not up to individual conscience but rather are expressly prohibited as immoral in God’s word, and as such all believers should take care not to profit from or otherwise be involved with them.

The teaching of the Bible is rich, deep and clear in regard to the expectations God has for believers as stewards of His investment assets. At the same time, much of the depth in that scriptural teaching is aimed at fleshing out the nuance between God’s command and personal conscience. This complexity should not be cause for us to freeze up and disengage, but rather serve as an invitation to lean into God’s truth and learn more of His character, His glory and His plans for your joy as you seek to honor Him in all you do, including how you invest His money. As Paul himself concludes his treatment of this discussion, “So, whether you eat or drink, or whatever you do, do all to the glory of God” (1 Cor. 10:31).

financial obedience is better than sacrifice

Financial Obedience Is Better Than Sacrifice

God doesn’t need your money, but He does command your obedience.

Droves of Christian investors are discovering biblically responsible investing (BRI) for the first time as the BRI movement continues to gain momentum around the country and around the globe. These investors are learning the hard truth that they have been investing God’s money – and it’s all God’s money, right? – into businesses directly profiting from and supporting some of the vilest forms of depravity that the human mind can conjure.

It is currently the norm for the portfolios of millions of Christians around the world to be invested in abortion drug manufacturing, pornography sales, LGBT activism, human trafficking infested supply chains and the list goes on.

And then we give that money to God on Sunday morning and expect that He is pleased with our offering.

Hear me right, my heart bleeds with compassion for my brothers and sisters and echoes the prayer of Christ on the cross, “Father, forgive them, for they know not what they do” (Luke 23:34), because not long ago that was me. I know the sting and sorrow of that conviction personally as it was only by the mercy of God that He caused me to stumble across the ugliness of what I was investing His money in, and what I was profiting from.

The Israelites in the Old Testament had the same problem. Over generations, the covenant people of God had lost their way. For some Israelites, theirs was a deliberately defiant disobedience. They knew the commands of God and they purposefully chose not to obey.

For others, like me and many Christian investors today, they simply were unaware. They had been “conformed to the pattern of the world” (Rom. 12:2) and were ignorant of what God expected of them as His people. Even though these Israelites were still adhering to the sacrificial system of worship with varying degrees of faithfulness, God was not pleased with their sacrifices. They brought their bulls, their rams, their doves and grain, but that wasn’t what God wanted. He wanted their heart and the obedient life that flows from a dedication to loving God above all else.

Hear God’s word to His people through the prophet Samuel, “’Has the Lord as great delight in burnt offerings and sacrifices, as in obeying the voice of the LORD? Behold, to obey is better than sacrifice, and to listen than the fat of rams’” (1 Samuel 15:22).

The danger for Christian investors wrestling with a newfound conviction over their investments is to seek to justify their investment in companies that profit from pornography (such as Amazon, Netflix, Roku, Dish Network and others), promote abortion (such as Pfizer, Intel, Bank of America and others), and sponsor LGBT activism (such as Wells Fargo, Target, T-Mobile, AT&T and others) by dedicating the returns from these investments as gifts to the Lord.

More than once I have heard well-meaning Christians declare that they have decided to continue to invest in companies involved in immoral activities so that they can give the profits to God. Their logic is that by doing so they are operating like a modern day Robin Hood of Christendom, profiting from the evil and giving to the holy, like some sort of spiritual money laundering scheme.

But there is a problem with this approach: God doesn’t want tainted gifts of sacrifice, He wants holy gifts of obedience. These believers confuse sacrifice with obedience, just as the Israelites did in Samuel’s day.

God makes it very clear He detests money earned from immoral activity and forbids His people from offering such ill-gotten gain to Him saying, “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” (Deuteronomy 23:18). And elsewhere the Bible teaches that it would be better to earn lower returns than to support injustice, “Better is a little with righteousness than great revenues with injustice” (Proverbs 16:8).

Brothers and sisters, we must pay very close attention to what God is saying here. He would rather us give Him nothing than give Him an unholy offering. Better yet, God would rather us “learn to do good; seek justice, correct oppression; bring justice to the fatherless, plead the widow’s cause” (Isaiah 1:17) with our finances and with our entire lives, and give Him the fruit of those good works, to the praise of His glorious grace.

It starts by learning what you are actually invested in from a biblical morals perspective, and you can find out for free at inspireinsight.com. Once you discover what issues are lurking in your portfolio, you can prayerfully make the changes necessary to transform your investment account into a God-glorifying financial engine that pursues righteous revenues instead of ill-gotten gain.

Let’s give Him holy gifts of obedience that are as worthy of His holy name as we possibly can by His grace. Such offerings are truly a pleasing aroma to our Lord.


 
 
 
Robert Netzly

Robert Netzly

Robert Netzly is the CEO of Inspire Investing and frequent contributor on FOX, Bloomberg, New York Times and other major media. Read more from Robert in his #1 bestselling book Biblically Responsible Investing, available at Amazon.com and other major retailers.

Follow Robert on Twitter and LinkedIn and get inspired!
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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Good News of Great Joy

Good News Of Great Joy

How biblically responsible investors are partners in declaring the good news of God’s sovereignty over all creation.

When Christ was born, the angels declared that it was “good news of great joy that will be for all the people” (Luke 2:10). What was this good news? “For unto you is born this day in the city of David a Savior, who is Christ the Lord” (Luke 2:11).

Christians today recognize and rejoice in this good news. We certainly count it great joy that God has made a way for the salvation of sinners like us through the death and resurrection of Christ, by grace alone, through faith in Jesus alone. This is very good news!

My question is, if Christ’s birth was “good news of great joy” and if it was “for all the people”, then why were so many people upset about it? Herod wasn’t happy about it. Pharisees, Sadducees and scribes weren’t happy about it. The Roman Empire wasn’t happy about it. Why didn’t the angels declare “good news that some people will count as great joy”? Or, “good news of great joy for those people who believe”?

The answer is that Christ’s birth was truly “good news” and “great joy” because it made a way for salvation for all who would call upon His name. All people now had a way to be at peace with God and receive forgiveness from their sin, even if not all people would embrace or act upon that good news, or celebrate or even appreciate that great joy.

And Christ’s birth was an announcement of “great joy” because it means that we are not abandoned to the hopeless task of ascending to God through perfect holiness because He has descended instead with His perfect holiness to invade our unholy world and offer to us His righteousness in exchange for our sinfulness through faith in His name! “Not having a righteousness of my own that comes from the law, but that which comes through faith in Christ, the righteousness from God that depends on faith…” (Philippians 3:9).

The birth of Jesus is good news and great joy because it proclaims the sovereignty of God over all creation, that He is in control, that He cares about us (whether we believe it or not) and that He is living and actively working for His glory and our joy among us on planet Earth.

You see, the goodness and joyfulness of the news of Christ’s coming is not relative based on an individual’s subjective interpretation of the news. The goodness and joyfulness of the news of Christ is an objective fact, an indisputable truth that stands above human opinion.

In a similar way, we all have the opportunity to join in proclaiming this good news of great joy for all the people by making every decision with the glory of God in mind. When we order the actions, intentions and decisions of our life in submission to the will of God and for the glory of God we proclaim that He is sovereign, that He reigns and rules and He alone is worthy of all honor and glory and praise!

Even seemingly innocuous decisions such as choosing which investments to include in your portfolio can and should shout the praises of our God, declaring that Christ has come, the rule and reign of our God extends over all of creation now and forevermore, and that He is worthy of our worship and obedience in every area of the life He has allowed us to live.

Will you celebrate the good news of great joy and make every decision shine for the glory of God, joining with the angels’ song and with believers everywhere, ascribing “glory in the highest” to our Immanuel, God With Us?

“And suddenly there was with the angel a multitude of the heavenly host praising God and saying, ‘Glory to God in the highest, and on earth peace among those with whom he is pleased!’ “(Luke 2: 13,14)

Shine for Jesus, Christian.


 
 
Robert Netzly

Robert Netzly

Robert Netzly is the CEO of Inspire Investing and frequent contributor on FOX, Bloomberg, New York Times and other major media. Read more from Robert in his #1 bestselling book Biblically Responsible Investing, available at Amazon.com and other major retailers.

Follow Robert on Twitter and LinkedIn and get inspired!
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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

What's the Purpose Image

What’s the Purpose?

“You, Lord, give perfect peace to those who keep their purpose firm and put their trust in you.”

Isaiah 26:3-4

“What’s the purpose?” is one of the most important questions we can ask in life. To this central subject, the Bible provides the answers for us . . . in Matthew 22:37, Jesus says that “the great and first commandment” is “You shall love the Lord your God with all your heart and with all your soul and with all your mind.” In Ephesians 2:10, we see that “For we are his workmanship, created in Christ Jesus for good works”. While as to what is required of us, Micah 6:8 instructs “but to do justice, and to love kindness, and to walk humbly with your God?”.

On this question of purpose, Pastor Rick Warren has taught and written extensively on the importance of living a “purpose-driven life”. His best-selling book, The Purpose Driven Life, has sold 32 million copies and been translated into 85 different languages. Millions of lives have been impacted as they have come to more fully understand their life’s purpose in relationship with God. Knowing our purpose is everything.

Just as the question of “What’s the purpose?” is imperative for our life’s journey, it is also critical to our investment journey as well. When investing, there are many important, sensible questions for investors to consider, incl. “What’s the state of the economy?”, “What are the prospects for growth?”, “Is inflation a significant risk?”, “How do valuation levels look?”, “What about global trade?”, “Will the Central Bank be adjusting monetary conditions?”, etc. However, the first and most important question investors need to ask themselves is “What’s the purpose of the investment?”.

Over the course of my career, the biggest mistake I have seen investors make is by not first asking themselves “What’s the purpose of the investment?”. By not asking that question first, oftentimes investors will miscalibrate their investment strategy with their financial objective(s). If the purpose of the investment is for a short term (less than five years) goal such as a planned major purchase or expenditure, then a lower risk strategy, maybe even a “savings” strategy rather than an “investment” strategy is likely the best course of action. However, for those financial goals that are long-term (more than five years) such as young children’s college funds, retirement, a vacation home, estate plans, charitable bequests, etc. a longer term investment strategy is prudent. The other questions about the economic, market, and political environment while important, are all secondary to primary question of the purpose of the investment. Too often, investors make the mistake of focusing their attention on the prospects for the coming days, weeks, and months while their financial goals are oftentimes measured in years, decades, and even generations. This disconnect can lead to dire outcomes.

Knowing our purpose is very important as we go through life. Regularly recalling that purpose can help to guard us against the idols, distractions, and temptations of this world that call out to us every day. Likewise, knowing the purpose of our investments can help to keep us from the behavioral traps and temptations that afflict all investors to one degree or another. Knowing purpose is foundational to faith as well as to investing.


 

 

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA, is the Chief Economic Advisor for Inspire Investing. Previously, Dr. Davidson served as the Chief Investment Officer for Wells Fargo Private Bank, overseeing more than $200B in assets. Dr. Davidson holds a doctorate degree from the DePaul University’s Kellstadt Graduate School of Business with his research focus in Behavioral Finance.

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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Go ye into all the world - Mark 16:15

Go Ye Into All The World

“And he said unto them, Go ye into all the world, and preach the gospel to every creature.”

Mark 16:15

I once heard an interesting observation that many people who live in rural areas can be very afraid of the perceived dangers of a big city…crime, traffic, strangers, etc. And as a corollary to that, many city dwellers can be exceedingly fearful of the risks to be found out in the country…wild animals, getting stranded, isolation, etc. This idiosyncrasy of human behavior is known as “familiarity bias” in that the risks with which we are most familiar appear less threatening to us while those risks with which we are less accustomed can be quite terrifying.

In investments, one of the most well-researched examples of this familiarity heuristic is what is referred to as “home country bias”. Home country bias is the condition by which investors show an excessive preference for investments emanating from their home market over those opportunities found in other parts of the world. With this behavioral predisposition, domestic risks generally seem relatively tame because they are more familiar when compared to those perils coming from overseas which are less well understood. While instinctual, home country bias could cause suboptimal decision-making by investors with possibly detrimental effects on their long-term investment results.

These days in particular, the flames of investors’ home country bias are reasonably being fanned by a litany of worries that are coming from outside our borders…China trade disputes, Brexit, Hong Kong protests, slowing Chinese economy, stagnating European economy, declining Japanese population, Middle East tensions, terrorist threats, etc. Add to that the recent outperformance of the US stock market versus the rest of the world and it is quite understandable that US investors are currently beset by home country bias. However, because of this familiarity bias, investors may be making the behavioral mistake of focusing on the risks of investing internationally while overlooking the opportunities that can be found abroad. Consider the following:

  • 96% of the world’s population is outside the United States.
  • Amidst concerns for the greying US population with a median age of 38.2, the median age for the other 7.2 billion people on our planet is much younger at 29.8.
  • While the US population growth is only 0.8% per year, the population outside the US is growing at 1.1%.
  • 85% of the world’s economic production (Gross Domestic Product) comes from outside the United States.
  • The US may have the world’s largest capital markets, but nevertheless 70% of the world’s securities (stocks and bonds) market value is found outside the United States.
  • The US economy (real GDP) is likely to growing around 2.3% this year, but the overall global economy outside the US will grow about 3.5%
  • The US stock market is near its all-time highs, however International Developed as well as Emerging Market stock market indices are both still 20% below their 2007 all-time highs.
  • While there is growing concern that US stock market valuations (Price/Earnings, Price/Book, etc.) may be getting a little lofty, valuations of International Developed and Emerging Market stock market indices trade at least a 25% discount to their US peers. Relative interest rate differentials make these even more attractive.

Sources: CIA World Factbook, Standard & Poor’s, MSCI, and Factset

While we do not know for sure, it is possible that the Disciples were also wrestling with their own home country bias as they pondered what to do next with their lives as their physical time with Jesus came to an end. Could that be why Jesus had to remind them several times about the importance of venturing into foreign lands? Once, with the Great Commission (Matthew 28, Mark 16, and Luke 24) and again just prior to ascension (Acts 1), we see Jesus’ instruction to go outside of their homeland. Even more so in today’s global society, the Bible’s instruction to go out into the world still applies. And as scary as it can be at times, the admonition probably applies even to investing!

Therefore, getting practical, as a general rule, it makes prudent investment sense to allocate between 25% – 50% of one’s equity exposure to International Developed and Emerging Market stocks. For example, if an investor’s overall portfolio allocation to equities is 60%, then 25% – 50% of that 60% should be allocated to international and emerging market stocks, i.e. 15% – 30% of the entire portfolio.

Go ye therefore into all the world!


 
 
 

 

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA

Dr. Erik Davidson, CFA, is the Chief Economic Advisor for Inspire Investing. Previously, Dr. Davidson served as the Chief Investment Officer for Wells Fargo Private Bank, overseeing more than $200B in assets. Dr. Davidson holds a doctorate degree from the DePaul University’s Kellstadt Graduate School of Business with his research focus in Behavioral Finance.

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*Advisory Services are offered through CWM Advisors, LLC dba Inspire, a Registered Investment Adviser with the SEC. All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

Blessed are the Risk Takers

“He who watches the wind will fail to sow, and he who observes the clouds will fail to reap.”

Ecclesiastes 11:4

As human beings, our capacity to worry is quite exceptional. In a worldly sense, this predilection towards fear is very understandable as bad things do happen in our lives and in the world around us. In fact, at times our worry has likely kept us from danger or harm. Personally, I know that even as the years have gone by, I have found it very difficult to break the grip of fear in my own life. If anything, I can take some small comfort in the fact that the nature of my worries has changed as time has gone by. These days, I find myself still worrying, but about different things than I did in my earlier years. That probably does not count as progress though!

Given our very human predisposition to worry, it should be no surprise that fears are especially heightened when it comes to investing. In fact, the foundational theory in the area of behavioral economics, Prospect Theory, by Noble laureate Daniel Kahneman (author of Thinking Fast and Slow) and Amos Tversky showed that humans are so overcome by fear that we instinctively weigh loss and gain prospects unevenly thereby causing suboptimal decision-making. Especially in the wake of the trauma of the Financial Crisis of 2007 – 2009, investors are predisposed to see danger lurking around every corner. These days, the list of fears that investors face is quite long: trade disputes with China, Brexit, domestic political divisiveness, Hong Kong protests, inverted yield curves, recessionary concerns, etc.

Nevertheless, despite the enticing self-preservation benefits of fear, the Bible is filled with admonitions against it (Isaiah 41:10, Luke 12:22, etc.) because of the obstructive effect it can have on our God-given destinies. Many times in the Bible, the challenge is put forward to “fear not”. Both the Old and the New Testaments have numerous stories of ordinary people overcoming their fears and taking significant risks with extraordinary, even miraculous results (think Moses, Esther, the Disciples, et al.).

In the Parable of the Talents (Matthew 25), it is illuminating to read of the master’s praise, “well done, good and faithful servant”, for the two employees who took risks with the funds that had been entrusted to them. Yet, maybe even more instructive is the scorn directed at the servant who was afraid and went and hid the entrusted funds in the ground . . . “You wicked and slothful servant.” and “cast the worthless servant into the outer darkness”. If this isn’t a call to guard our hearts against acting out of fear, I don’t know what is!

Carrying over this Biblical call of risk-taking to investing, it is important for investors to be on guard against getting wrapped around the wheel of whatever the “worry of the day” may be. Rather, investors should undertake prudent risks aligned with the timeframe of their financial objective. Certainly, for short-term (less than five years) financial objectives such as planned major purchases or expenditures, risk-taking should be minimized. Actually, these sort of short-term financial goals are better viewed as “savings” rather than “investment” strategies. However, for those financial goals that are long-term (more than five years) such as young children’s college funds, retirement, a vacation home, estate plans, charitable bequests, etc. a spirit of prudent risk-taking is necessary in order to grow the funds while outpacing inflation and taxes.

The history of the stock market shows the wisdom of the Bible’s guidance on fear and risk-taking. Going back to its inception in 1927, the S&P 500, the benchmark U.S. stock market index, despite dramatic corrections and crashes, has had a total return of approximately 10% annualized. During this very long time period, despite prior generations’ “worry list” including wars, rise/fall of Communism, recessions, famines, assassinations, political discord, etc. there has never been a 14-year holding period in which the total return of the S&P 500 has been negative. Prudent risk-taking pays off over the long-term. Source: Standard & Poor’s

Obviously, “blessed are the risk-takers” is not actually one of the Beatitudes (Matthew 5). Nevertheless, investors who believe that the Bible has wisdom applicable to contemporary life are well advised to consider its guidance as it relates to fear and risk-taking as they make investment decisions.