Faith-based investing does not mean you only invest in companies that just align with your values. Instead, you invest in companies that have sound religious-aligned principles and avoid those that don’t, such as companies that support gambling, abortion, pornography, and other behaviors considered anti-social.
Key Principles and Values
Several principles and values guide faith-based portfolio management. Money is important to everyone's life, but given the option to be selective in the investment of firms so that they align with your beliefs is the opportunity available with faith-based investing. When it comes to financial planning and investing, your values should be the foundation upon which all else flows.
Along with wealth comes management responsibilities, not simply ownership rights. It is rooted in religious principles that guide adherents to manage their finances as a resource that has been entrusted to them by God.
This is the reason why even financial companies guided by religious values take their investment decisions very seriously. Religion teaches self-regulation and control, which apply equally at the individual and corporate levels.
Financial stewardship demands that one embraces contentment and avoid excessive greed. As stewards, investors are called upon to manage finances under their stewardship with faithfulness and integrity. Financial stewardship also encourages a spirit of generosity as it recognizes that blessings are God-given gifts to be shared with others.
Ensuring Your Portfolio Aligns with Faith
Investing in line with faith-based values is gaining popularity. Today, there are ETFs and mutual funds that align with religious beliefs. These companies have created standards focusing on family or other aspects that aim to align investments according to moral values and improve the world we live in. Responsible investing can be viable if you want to align your investment portfolio with religious principles.
Faith-based investing can also be seen as a type of Socially Responsible Investing (SRI) and the two have a few things in common. The major difference is that SRI typically goes for companies that support environmental sustainability and social justice. On the other hand, Faith-based investing is rooted in religious teachings and the desire to honor God even when seeking financial returns.
The two types of investing tend to have areas of overlap, which allows you to invest in a way that aligns with your religious and moral values. Typically, however, the two diverge on key issues like abortion and LGBTQ rights, with faith-based investing steering clear of such companies.
At Heritage Financial Advisors, we understand what you want to achieve and how that aligns with your core beliefs to help ensure that the critical areas of your life work together. The key step is to set your investment goals and decide what to include and what to avoid in your investment portfolio.
Options to Expand Your Portfolio
Even with faith-based investing, you can still assemble a portfolio of lower-risk investment combinations that give similar returns over time as higher-risk ones. Investing in the stock market, for example, has numerous benefits, but there are also other ways to make your money work for you safely.
Consider exploring different investment opportunities and see if they align with your values, goals, and skill set. Investing in real estate is another way to build a portfolio. For that, you may want to seek the guidance of a Certified Financial Planner™ like Chris Holcomb at Heritage Financial Advisors.
Importance of Portfolio Diversification
The investment world is dynamic and big, immensely influenced by human emotions. Millions of people make billions of decisions reflecting their feelings of fear or security, hardship, or prosperity. Attempting to make reliable forecasts in the face of this staggering complexity is not always an easy undertaking. Since nobody knows what will happen next year, next month, or even next week, your plan as an investor must allow for the fact that the investment markets will experience unexpected rough periods now and then. This is where diversification proves beneficial in any management strategy including faith-based investing.
Faith-Based Investing Success Stories
Faith-based businesses can thrive in any industry ranging from food and beverages, trucks and transport, to clothing stores and many more. They are run by people who want to spread their beliefs through their work ethic, customer service, and products/service.
As the largest faith-based mutual fund family in the U.S., GuideStone Funds is known to investors as a broad list of diversified mutual funds across many major asset classes. GuideStone is committed to helping clients meet their financial goals so they can better accomplish the ministry goals for which they were founded.
PrayerBowls, a Christian business that sells bowls to hold prayer intentions, is aligned with three charities, and saw revenue growth of 55% in 2017 with an expected 38% growth witnessed in 2018.
A Bible app for Spanish speakers created by Trevor McKendrick grew from a humble $500 investment to over a million users and a business worth selling, carrying lessons for entrepreneurs on starting simply and monitoring user engagement for growth.
Challenges in Faith-Based Portfolio Management
Faith-based investing has faced criticism for several areas including:
- Limited diversification options compared to traditional fund options
- Higher fees and expense ratios for Biblically responsible investments
- Underperformance compared to peers
Thankfully, the financial environment has evolved greatly and investors no longer have to sacrifice portfolio performance for their religious beliefs. Faith-based investing opportunities have grown tremendously over the years, and the guidance of a Certified Financial Planner™ like Chris Holcomb at Heritage Financial Advisors, with experience in faith-based investing, helps provide the best investment plan based on your goals and risk tolerance.
Conclusion
A challenge for faith-based organizations is finding a trusted partner who deeply aligns investing with faith-based values. Many financial advisors are still new to the concept of faith-based investing and it’s important to choose one that understands this fast-growing investing niche. If you are interested in faith-based investing, take the time to work with an experienced Certified Financial Planner™ like Chris Holcomb, who can help you put together a portfolio that honors your religious beliefs and uphold your values.
Whether you’re beginning your investment journey, reimagining your retirement, or anything in between, you need a professional in your corner. At Heritage Financial Advisors, we believe that financial outperformance and upholding investor values go hand in hand, which our long-term track record supports. We invest to deliver strong performance in accordance with your faith and beliefs.
Sources
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- "7 Key Principles for Christian Investing." Crown, 1 Jan. 2018, www.crown.org/wp-content/uploads/2018/08/7-Key-Principles-for-Christian-Investing.pdf. Accessed 8 Aug. 2024.
- "Iblical Financial Principles and 5 Practical Steps to Live by Them." Christian Stewardship Network, 22 Jun. 2023, www.christianstewardshipnetwork.com/blog/2023/6/22/biblical-financial-principles-and-5-practical-steps-to-live-by-them. Accessed 8 Aug. 2024.
- "Guidestone." Guidestone, 1 Jan. 2024, www.guidestone.org/Organization/Investments#:~:text=Faith%2DBased.&text=As%20the%20nation's%20largest%20faith,across%20most%20major%20asset%20classes. Accessed 8 Aug. 2024.
- "8 Faith-Based Business Success Stories." Starter Story, 7 Aug. 2024, www.starterstory.com/ideas/christian-faith-based-products-business/success-stories. Accessed 8 Aug. 2024.