Values First Advisors

Faith-based investing is an idea whose time has come. 2009 has seen an increase in interest among the Christian community in putting their money where their values are. This increase in popularity is due, in part to a couple of wonderful ministries, Dan Celia’s Financial Issues and Bob Lotich’s Christian Personal Finance, and their efforts to spread the word about the importance of financial stewardship. The increased need for values based investing has seen the launch of a new Exchange Traded fund as well.

Dan Celia has espoused the virtues of financial stewardship for 25 years. The goal of his ministry is to help people make good financial decisions. Dan reminds Christians that God does own all of what we own and not just the part that we “give” back to Him. Dan strives through his radio show to  empower and educate his listeners to be wise with the finances God has given them. Through wise and biblically sound investing, Dan hopes that Christians will have more to give to the Kingdom of God in the future as well as the present. Thanks to Dan’s steadfast stance on faith-based investing, more Christians are becoming aware of the importance in their relationship with the Lord.

Bob Lotich’s mission at Christian Personal Finance is much like Dan’s. Bob’s belief is that God did not put us on this earth to amass riches. Bob believes that God has a purpose for our money which is to build God’s Kingdom and help those less fortunate. Christian Personal Finance is designed to be a resource for Christians to get practical tips and wisdom about how to handle their personal finance from a biblical perspective. Bob strives to help Christians be the best stewards of their finances.

Earlier this month, FaithShares, Inc. launched 5 new Exchange Traded Funds (ETF) that are based on the 5 largest Christian denominations in the United States – Baptist, Catholic, Lutheran, Christian, and Methodist.

An exchange-traded fund (or ETF) is an investment vehicle similar to a mutual fund, but trades like a stock. An ETF holds assets such as stocks or bonds. Most ETFs track an index, such as the S&P 500.  They may be seen as attractive investments because of their low costs, tax efficiency, and stock-like features.

“We created these funds to meet the needs of investors who want to participate in the potential of the stock market, yet be good stewards of their money,” said Thompson S. Phillips Jr., President of FaithShares. “As an ETF, each of our funds will include 100 stocks of large, well-known companies but specifically exclude those considered to be ’objectionable industries’ by a specific denomination. Our funds are the first Christian ETFs in the market.”

The FaithShares Funds allow individuals and groups to invest in accordance with the tenets of their faith in one security, while still getting exposure to the broad market. The portfolios will be screened to exclude companies that benefit from gambling, alcohol, tobacco, pornography, weaponry and other activities that are included in each denomination’s published criteria.

“We did a great deal of research on the covenants of the various denominations in designing these funds,” said Garrett Stevens, CEO and portfolio manager. “The Christian Values Fund is the most conservative and we feel it answers the needs of non-denominational church members and other denominations not specifically represented by our other ETFs.”

Annually, FaithShares Advisors, the management company of FaithShares, will give a minimum of ten percent of its net income to a ministry associated with the respective denominations. The funds will be rebalanced annually and offer complete transparency about their holdings. ETFs offer an inexpensive way to invest in the market. From 2000 to 2006, assets in other faith-based investments have grown seven-fold underscoring the public’s interest in investing according to their beliefs. Investors can purchase the funds through their investment advisor or discount broker.

How much will investing according to my faith cost me?

The biggest obstacle most faith-based investments face is the performance issue:  How much will this cost me?

Whether most Christians will admit it or not, performance is a key factor. The question I hear all the time is “Will investing according to my faith cost me something?” I typically have two responses:

1. First off, if financial performance does suffer, does it really matter? After all, can’t the God who came to this earth to die for our sins and rose from the dead, who walked on water, turned water into wine, fed thousands with five loaves and two fish, bless you somewhere else?  Can’t He add a few percentages here and there?  He calls us to sacrifice for our faith, to take up our cross daily in all areas of our life (finances included).
2. There is no proof (positive or negative) showing screening out sinful companies over the long-term will significantly increase or decrease your performance. It comes down to security selection and asset allocation.   I argue that if you screen out negative companies (those morally and physically polluting our society) and screen in positive companies (those making a positive difference in our world), performance logically should improve.

Sin versus Virtue (the battle royal)

Take a look at two funds:

• The Vice Fund (VICEX): specifically seeks out tobacco, alcohol, and gambling companies.  As of 12-21-09 the fund was up 12.32% for the year (almost 14% less than the Standard & Poor’s 500 Index).
• The Gilead Fund (ETGLX): a fund dedicated to faith-based investing and avoiding “sin stocks”, is up 43.19% over the same period. This clearly trumps the S&P 500 (besting index by over 17%) and the Vice Fund (beating the sin fund by almost 32%).

Clearly screening out “sin stocks” didn’t hurt the Gilead Fund.  In fact, the fund has been a category leader for the past 12 months!

History confirms that bad behavior has a way of catching up with both people and companies. Earning a return in a manner that honors God and is a blessing to your fellow man is more important than just maximizing your returns without considering what your dollars are supporting. It may or may not prove to be more profitable to invest in “sin” stocks, but eventually there may be a price to pay. With resources such as Financial Issues, Christian Personal Finance and Faith Shares, Inc., Christians have the tools necessary to ensure that they are investing in a God honoring way.