Investing Session 16

Transcription

1 Investing Session 16 Session Summary: In this session Ron Blue shares a comprehensive Biblical perspective on investing. Ron covers why, when, how and where to invest based on God s Word. In addition, Ron covers what is and is not an investment, as well as a sequential model for investing. Ron also discusses the difference between accumulation, preservation and speculation, as well as the place morally conscience investing plays in the investment philosophy. I. Preview II. Perspective and Paradigms III. Principles and Precepts (Biblical Wisdom) IV. Processes and Understanding V. Personal Convictions (Biblical Philosophy) VI. Practice (Client Counsel) I. PREVIEW To Know: 1. When to invest A sequential model for investing 2. Why invest What is an investment and what is not an investment 3. How to invest Processes to go through when investing 4. Where to invest What difference does it make where I put my investments? To Believe: 1. Investments are a tool and not an end in themselves 2. The Bible has a great deal to say about investments and investment decision-making: a. b. Long time horizon c. Professional counsel d. Motive e. Perspective Session 16 Kingdom Advisors Training 1

2 To-Do Behavior: 1. To be able to counsel clients into a Biblical approach to investment decisions 2. To be able to show others that paying off debt may be the best investment there is II. PERSPECTIVE AND PARADIGMS Worldly Perspective: 1. Get rich quick 2. time horizon 3. Spend and consume first 4. Time is an enemy 5. Upward trends always 6. Always buy low and sell high III. PRINCIPLES AND PRECEPTS Economic Perspective: 1. Economic uncertainty is certain 2. Economic prosperity is certain only in 3. Economic cycles are normative 4. The future cannot be a. You don t know what you don t know Save and Invest First Prepare your outside work, make it fit for yourself in the field; and afterward build your house. (Proverbs 24:27 NKJV) Preservation and Steady Growth of Capital A faithful man will abound with blessings, but he who hastens to be rich will not go unpunished. (Proverbs 28:20 NKJV) Long Time Horizon For which of you, intending to build a tower; does not sit down first and count the cost, whether he has enough to finish it. (Luke 14:28 NKJV) Session 16 Kingdom Advisors Training 2

3 is a Tool Go to the ant, you sluggard! Consider her ways and be wise, which, having no captain, overseer or ruler, provides her supplies in the summer, and gathers her food in the harvest. (Proverbs 6:6-8 NKJV) Time is a Tool (Enemy) A man with an evil eye hastens after riches, and does not consider that poverty will come upon him. (Proverbs 28:22 NKJV) Cycles Are Inevitable For since the fathers fell asleep, all things continue as they were from the beginning of creation. (2 Peter 3:4b NKJV) Diversification Cast your bread upon the waters, for you will find it after many days. Give a serving to seven, and also to eight, for you do not know what evil will be on the earth. (Ecclesiastes 11:1-2 NKJV) Seek Wise Counsel Listen to counsel and receive instruction, that you may be wise in your latter days. There are many plans in a man s heart, nevertheless the Lord s counsel that will stand. (Proverbs 19:20-21 NKJV) Avoid High The rich rules over the poor, and the borrower is servant to the lender. (Proverbs 22:7 NKJV) Monitor Your Anxiety Be anxious for nothing, but in everything by prayer and supplication, with thanksgiving, let your requests be made known to God; and the peace of God, which surpasses all understanding, will guard your hearts and minds through Christ Jesus. (Philippians 4:6-7 NKJV) Establish Limits on the Amount You Invest Better is a little with the fear of the LORD, than great treasure with trouble. (Proverbs 15:16 NKJV) Remove falsehood and lies far from me; give me neither poverty nor riches - feed me with the food allotted to me; Lest I be full and deny You, and say, Who is the LORD? Or lest I be poor and steal, and profane the name of my God. (Proverbs 30:8 NKJV) Session 16 Kingdom Advisors Training 3

4 Spousal in Decision Making Submit to one another out of reverence for Christ. (Ephesians 5:21 NIV) Nevertheless let each one of you in particular so love his own wife as himself, and let the wife see that she respects her husband. (Ephesians 5:33 NKJV) Where to Invest You are the salt of the earth; but if the salt loses its flavor, how shall it be seasoned? It is then good for nothing but to be thrown out and trampled underfoot by men. You are the light of the world. A city that is set on a hill cannot be hidden. Nor do they light a lamp and put it under a basket, but on a lampstand, and it gives light to all who are in the house. Let your light so shine before men, that they may see your good works and glorify your Father in heaven. (Matthew 5:13-16 NKJV) Biblical vs. Worldly Perspective: Biblical Perspective Worldly Perspective 1. Preservation and Steady Growth of Capital 1. Get Rich Quick Proverbs 28:20 2. Time Horizon 2. Short Time Horizon Luke 14:28 3. Saving/Investing First 3. Spend/Consume First Eccl. 5:13,14 and Proverbs 24:27 4. Time is a 4. Time is an Enemy Proverbs 6:6, 28:22 5. Cycles Inevitable 5. Upward Trend Inevitable 2 Peter 3:4 6. Strategy 6. Timing Strategy Eccl. 11:12 Session 16 Kingdom Advisors Training 4

5 IV. PROCESSES AND UNDERSTANDING WHEN to Invest: Session 16 Kingdom Advisors Training 5

6 WHY invest? What is truly an investment? 1. Something that is purchased with one or two expectations: a. Growth in value b. Provides a yield or 2. Something that can and will be sold when: a. It has accomplished its b. It can not and will not accomplish its purpose What is not an investment? Car 3. Diamond ring 4. Jewelry 5. Furnishings 6. Second homes Session 16 Kingdom Advisors Training 6

7 What is the difference between gambling and playing the stock market? 1. Professional 2. Historical results HOW to invest: There are three strategies of investing for three phases of life. There is: 1. Accumulation 2. Preservation 3. Speculation 1. In preservation the objective is to, both in earning power and in purchasing power. 2. Preservation must be done in the midst of dynamic economic scenarios such as: a. Inflation b. Deflation c. Tax law changes d. Monetary collapse e. Political upheaval Session 16 Kingdom Advisors Training 7

8 To preserve wealth one needs an investment strategy that takes into account all of the possible scenarios. Additionally, in preservation there are competing investment objectives. They are: 1. Maximize Growth 2. Maximize Income 3. Maximize 4. Minimize Risk 5. Morally Responsible Some of the quantifiable variables that affect objectives are: 1. Age Tax situation 4. Financial 5. Certainty of future cash flow The Perfect Investment: 1. No risk of loss of principle 2. Instantly to cash 3. Maximum yield available 4. Always grows in value 5. Morally responsible Always competing Evaluate The Risk: Macro Economic: 1. Inflation Political 4. Tax 5. Monetary Collapse Session 16 Kingdom Advisors Training 8

9 Business: 1. Credit\Debt 2. Business Cycle 3. Industry\Product Line 4. Other: 1. Markets 2. Interest Rates 3. Merger\Sale 4. Unknown Managing The Risk 1. By Diversification (Eccl. 11:1-2): a) By Time Period dollar cost averaging b) By Asset Class asset allocation c) By Specific Investment d) By Geography e) By Professional Manager 2. By Faith (Hebrews 11:6): a) Prayer b) c) Wisdom Investment Strategy Speculation Once I have accumulated all that I need, I shift to the preservation phase through diversification, and now I can take risks with the excess without harming my financial well-being or peace of mind. 1. Don t fall into the binary trap. 2. Do consider paying off a home mortgage and/or giving. Session 16 Kingdom Advisors Training 9

10 WHERE to Invest: Does God care where I invest? 1. What level of detail in my life does God care about? a. Where I shop b. What I view c. What I drive d. How much I give e. Where I invest God owns it all and we need to ask what He would like us to do with His money. Key verses on the theology of money If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him. (James 1:5 NIV) And without faith it is impossible to please God, because anyone who comes to him must believe that he exists and that he rewards those who earnestly seek him. (Hebrews 11:6 NIV) Questions to ask when considering where to invest: 1) If I had $100 million to invest would I screen? 2) Would I give up possible economic returns for my convictions? 3) What are our convictions? Chick-Fil-A, and many others, serve as examples of God honoring people who live by their convictions. In working with clients we must: 1. Prayerfully determine our own personal convictions regarding where to invest. 2. Encourage our clients to prayerfully determine their personal convictions regarding where to invest. Session 16 Kingdom Advisors Training 10

11 We need to be careful about what our investment dollars are supporting. Some companies that typically offer strong profits prey on the weaknesses of others gambling enterprises are a good example. Christians need to think twice about investing in any company that would be deemed socially unethical. My advice is to stay away from any company that makes money from activities that are morally reprehensible. Larry Burkett, Sept, 2002, Money Matters Newsletter Ways to Apply Ones Convictions 1. Money managers that screen 2. Mutual funds 3. Other asset classes a. Real estate b. Hard assets c. Private equity My son, give attention to my words; incline your ear to my sayings. Do not let them depart from your eyes; keep them in the midst of your heart; for they are life to those who find them, and health to all their flesh. Keep your heart with all diligence, for out of it spring the issues of life. Put away from you a deceitful mouth, and put perverse lips far from you. Let your eyes look straight ahead, and your eyelids look right before you. Ponder the path of your feet, and let all your ways be established. Do not turn to the right or the left; remove your foot from evil. (Proverbs 4:20-27 NKJV) V. PERSONAL CONVICTIONS Ron s personal convictions on investing: 1. Economic uncertainty is certain. 2. Economic cycles are. 3. The future cannot be predicted. 4. Investments are a tool one uses to accomplish financial objectives. They are not an end in themselves. 5. Many things may have investment value, but they are not in reality an investment. 6. Accumulation, preservation, and speculation are the three phases of investing. 7. One accumulates wealth by spending less than they earn over a long time period. Session 16 Kingdom Advisors Training 11

12 8. One preserves wealth by following the Biblical principles of, professional managers, and a long time horizon. 9. People may make money on their investments, but rarely is significant wealth accumulated through investment expertise, except by the professionals. 10. Investment speculation should only be done after asking the question as to whether this money would be better used by giving to a Kingdom purpose and secondly can I afford to lose this money with no adversarial impact on my long term goals. 11. Using my investments to make a statement of is legitimate and may or may not cost me something in the way of return and/or risk. VI. PRACTICE Client Counsel: 1. Always maintain a long-term. 2. You can t be an expert at everything. 3. High risk to one is conservative to another. 4. The personal time required to manage an investment can be a high cost. 5. Always invest from a. 6. There is no free lunch. 7. Diversify, diversify, diversify. Decision-Making Process: 1. Decision 1 - Have I repaid all short-term debt? 2. Decision 2 - Do I have adequate cash? 3. Decision 3 - Am I appropriately diversified? 4. Decision 4 - Have I integrated my Biblical convictions into my investment strategy? Session 16 Kingdom Advisors Training 12

13 Questions to ask myself: 1. What are my reasons for making this investment? a. Becoming debt free. (Proverbs 22:26-27) b. for my family, meeting future needs, and establishing an inheritance. (Proverbs 30:25) c. Allowing increased giving. (Proverbs 22:9) 2. Could I be investing unwisely due to an attitude of: a. Greed? (I Timothy 6:9; Proverbs 22:9) b.? (Proverbs 16:5) c. Fear? (Proverbs 18:11) 3. Am I presuming on the and creating anxiety for myself or my family? (Matthew 6:25; Philippians 4:6-7) 4. Have I considered whether my investments should represent my moral convictions? (Matthew 5:13-16) Please take the time to complete your first pass at your own personal convictions related to this session on the Personal Convictions Worksheet. Session 16 Kingdom Advisors Training 13