Investing With a Sound Mind (2 Timothy 1:7)

1. Investing With a Sound Mind (2 Timothy 1:7)

2. Money Possessions, and Eternity • Appendices • A: Financial Integrity and Accountability in Churches and Ministries • B: The Use of Ministry Funds for Building • C: Lending Money, Charging Interest, and Co-signing a Loan • D: Practical Guidelines to Control Spending • E: Should Giving Always be Kept Secret? June 13 Later May 30 May 23 June 6

3. Investing With A Sound Mind • Part 1 – The Challenge of Money and Possessions • Ch. 1-5: Asceticism, Materialism & Prosperity Theology • Part 2 – Seeing Money in Eternity’s Light • Ch. 7-11: Stewards Destiny and Eternal Rewards, and the Pilgrim’s Mentality • Part 3 – Giving and Sharing Money and Possessions • Ch. 12-15: Tithing, Reciprocating God’s Grace, Helping the Poor, Reaching the Lost, Ministry Finances and Fund-Raising • Part 4 – Handling Our Money and Possessions • Ch. 16-21: Making Money, Debt, Saving, Retiring, Insuring, Investing, Leaving Money, and Teaching Children • Conclusion: Where Do We Go from Here?

4. Investing with a Sound Mind • Investments and Biblical Principles (p. 356) • Values Based Investing (p. 357) • How much risk is appropriate? (p. 360) • Is investing Gambling? (p. 361) • What am I investing? (p. 362) • Guidelines for Investing (p. 363)

5. Investing With A Sound Mind • For God hath not given us the spirit of fear; but of power, and of love, and of a sound mind. • (2 Timothy 1:7)

6. Investments and Biblical Principles (p. 356) • Although Gambling Violates Biblical Principles, other risky actions are legitimate • Illustrations involving investment • Real Estate (Prov. 31:16) • Jesus teachings suggest he approves • Parable of Talents (Matt 25:14-29); • Parable of the 10 pounds (Luke 19:12-26) • Jesus teaching to invest in eternity (Matt 6:19-21) adds perspective • Investing often benefits the business (as well as the investor) • e.g. investing in high yield 2nd mortgages exploits those who do what we recommend against • Mutual Funds distribute money across many companies • Some of which do things a Christian wouldn’t condone • Can we invest when it profits abortions, tobacco, alcohol, etc.?

7. Values-Based Investing (p. 357) • Churches often don’t evaluate source of gift • Similarly, Christians don’t evaluate source of income • Thou shalt not bring the hire of a whore, or the price of a dog, into the house of the LORD thy God for any vow: for even both these are abomination unto the LORD thy God. (Deut 23:18) • When leadership knows, they should address it • For donors, ministry, and those affected by donors actions • Socially Responsible Investing (SRI) • Amy Domini established Domini index in line with liberal views • Avoided Weapons, Nuclear Energy, Environmentally unfriendly • Often out performed S&P 500 • Couldn’t Christians do the same for abortion, anti-Christian bigotry, sex and violence • And have no fellowship with the unfruitful works of darkness, but rather reprove them. (Eph. 5:11) • Isn’t easy to track • What’s difference between Playboy and Telescan? • Hewlett Packard support Planned Parenthood • Am Ex uses shareholder funds to promote Homosexual causes • Disney owns Miramax, Touchstone, and Hollywood Pictures

8. Values-Based Investing (p. 358) • Some argue boycotts are more effective than worrying about minute ownership • Selling shares may drive price down, but the market will then find it attractive, and drive it back up • If I refuse to buy their product, they lose profit, and the market drives their price down • Problem is that we selectively boycott, and our business may well go to others with just as many anti-Christian tendencies • Complexity motivates us to give more thought to the issue, not less • Regardless of movement of share price, we are accountable for where we put God’s money • e.g. Talisman energy, large Canadian oil company (25% of business in Sudan) supports the genocidal regime that enslaves persecuted Christians • TIAA-CREF, Vanguard and New York divested themselves, Fidelity did not • Scott Fehrenbacher makes case that Christians shouldn’t own companies that invest in anti-moral and anti-Christian behavior • Put Your Money Where Your Morals Aare • eVALUEator

9. Values-Based Investing (p. 359) • Mennonite Mutual Aid Association had >$1B in MMA Praxis Growth Fund (>30% in abortion or porn or promoted homo sexuality in their policies) • Values-based investing is not new • Quakers withdrew over slavery in early 1800s • In 1920s churches screen “sin stocks” (Alcohol, Tobacco, Gambling) • Some Christians use the Timothy Plan • Some years it underperforms, but they stick with it If enough Christians adopt values-based approach, perhaps mutual funds would shift to moral stocks. But even if they don’t, God holds us accountable.

10. Socially Responsible Investing (SRI)The Debate over where to draw the lineAustin Pryor – (4/06) • Every financial Decision has stewardship issues • Consumer products • Housing • Entertainment • Children’s Education • Investments • Who we are employed by • Where Do We draw the line? • All decision should be in light of a relationship to Christ • Where and for whom do we work? • How and for what will we spend? • How and in what will we invest? • Where and how much will we give?

11. Basics of SRI • SRI screens fall in three camps • Avoidance Investing (negative Screening) • Penalize the bad guys • Advocacy Investing (activist screening) • Convert / Replace the bad guys • Affirmative Investing (positive screening) • Reward the good guys • Secular Screens • Affirmative Action, Animal Rights, Environmental Protection, Gay and Lesbian Rights, Gun Control, Low Income Housing, and so-called Women’s issues (pro-abortion) • Against air pollution, alcohol, defense and weapons contractors, gambling, nuclear power, and tobacco • SRI funds are all over the map – evaluate carefully • Avoiding Direct Involvement • SMI has written favorable articles on Timothy Plan, South Shore Bank in Chicago, etc. • But SMI has not made major emphasis on SRI funds because non-SRI funds are acceptable vehicles

12. An example thought Process • Philip Morris is on almost everyone’s SRI bad list • They also own Kraft Food • Work • I wouldn’t work for Philip Morris • But I could work for Kraft Foods • Spending • I wouldn’t buy Marlboros • But I see nothing wrong with buying Kraft Cheese, salad dressings, Oreos, Ritz crackers, Post cereals, Jell-O, Kool Aid, Cool Whip • How can I purchase products that profit a bad company? • Because corporate interconnectedness makes it impossible not to • Focused boycotts are effective

13. An example thought Process • Philip Morris / Kraft Food • Investing • I won’t buy Philip Morris Stock (now called Altria Group) • Direct conscious effort to profit from tobacco sales • I will buy a mutual fund that invests in Altria • Indirect incidental contact as I attempt to diversify • e.g. $10K in Vanguard Index 500 (worth $109.4B) • I would own 0.000 000 0914 of a fund that owns .00959 of Philip Morris • One piece of 865 million pieces • When a fund buys a share, it doesn’t go to the company • Secondary Market purchases from other investors • It’s like buying a used car • Giving • It could be a job or investment with Philip Morris would gain more, thus increasing my giving • Greater giving potential doesn’t trump the “direct involvement” ethic

14. Avoiding Even Indirect Involvement • You may believe indirect involvement principle isn’t good enough • Austin doesn’t believe Bible requires it • Nor does he believe it is achievable • Your Work • Work only for companies that are morally pure • Rules out: AT&T, Disney, Pfizer, J.P. Morgan, Chase, Nike, Microsoft, Levi Straus, Bank of America, Neiman Marcus, Circuit City, Wells Fargo, Time Warner, Holiday Inn, etc. • Should no Christians work there? • Your Spending • Unlike buying stock, buying products profits companies • Maybe easy with Circuit City • What about Johnson & Johnson, General Mills, etc. Not likely. • Your Investing • Even Christian Mutual Funds draw the line somewhere • Some don’t screen for companies which support domestic partners or the U.S. government • Perhaps just leave your money in your bank • No guarantee they do any better. • Your Giving • If an SRI fund returns 7% over 5 years vs. 12% in other funds, is the lower amount you have to give worth the reduced return? • Some say yes, because of principles • Others say no

15. SRI Conclusions – The End • We are in the world and must function in it • I wrote unto you in an epistle not to company with fornicators: Yet not altogether with the fornicators of this world, or with the covetous, or extortioners, or with idolaters; for then must ye needs go out of the world. (1 Cor. 5:9-10) • We can’t avoid contact with all disagreeable people • Doubt it is possible to have complete investment purity • Any more than desire to breath clean air leads us to wearing gas masks • At some point the marginal improvement in purity isn’t worth the added restriction • Ultimate goal is be more effective in stewardship, respecting each other’s opinions • With all lowliness and meekness, with longsuffering, forbearing one another in love; Endeavouring to keep the unity of the Spirit in the bond of peace. (Eph. 4:2-3)

16. How much risk is appropriate? (p. 360) • Mutual Funds range from … • Conservative: striving for steady, consistent growth • Aggressive: more volatile, greater potential for growth (and loss) • What risks should we take with God’s money? • Steady plodding (not hasty speculation) • “The thoughts of the diligent tend only to plenteousness; but of every one that is hasty only to want.” (Prov. 21:5) • Investors who are eager to get rich set themselves up for loss • “Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase.” (Prov. 13:11) • Many lose sleep as well as money because they are not content to gather money “little by little”

17. How much risk is appropriate? (p. 360) • Law of Risk and Return • Higher the promised (or potential) return, the higher the risk • 100% annual return prospectus example. Why? • Because so risky (or illegitimate) that no bank would loan them money • All investments are risky • Farmers take risk when they plant their seed • Weather, tornado, insects, burning barns • Life involves risk • Some necessary, reasonable, well worth taking • Some not

18. Is Investing Gambling? (p. 361) • Not all risk is gambling • Crosses line with risk too great • Stock market involves risk • Reasonable investment for those who choose carefully • Every decade or so, the market takes a huge dip • Reminds us we cannot count on constant upward movement • Venture Capital Investing – Helping young emerging companies • High Potential Return, High Risk of Loss • Arguably provides a service to society • Requires someone not prone to worry • No worries • Those who invest this way must be patient and detached • Those whose heart and happiness go up and down with the stock market, lose their ability to focus on following Christ • Since our hearts follow our treasures (Matt. 6:21) this doesn’t come naturally

19. Is Investing Gambling? (p. 361) • $600 computer stock and the hospital call • Randy’s stock tripled when ready to sell • Church member in hospital required him all day • Next day, stock fell – lost $800 • If God wasn’t worried, why should He be? • Evaluate risk/return of the investment • Also evaluate time, energy, and emotional attachment • Sometimes money is the smallest cost • The land deal that destroyed the family • Partner with brother when close (now distant) • Difficulty making payments • Wife ill • Stressed family • “Looked like a great deal – price was enormous”

20. Why am I Investing? (p. 362) • When is an investment not an investment? • Doesn’t profit • Intending to be used (otherwise, it’s a purchase) • Examples - wedding ring, car, mountain cabin • Bad Reasons to Invest • Greed (1 Tim 6:9) – Build your kingdom. • Rich toward self and not God (Luke 12:31) • Envy (Psalm 73:3) • Pride (1 Tim. 6:17) • Ignorance (Prov. 14:7) • Fear and Insecurity (Phil 4:19) • Good reasons • Provide for Family, the needy, ministry • Many foundations invest principle and use earnings for ministry • Must ask - if we gave principle, would God get a better return? • Once given, it is safely in God’s hands • If not, we risk it leaving (or us leaving) before we can give • Many have learned this the hard way • Downturns, takeovers, bankruptcies • The only sure way to invest in eternity is by doing what the poor widow did • Give it all now

21. Guidelines for Investing (p. 363) • Never risk money you cannot afford to lose • Never make uniformed hasty decisions • Never make major financial decisions without counting all costs • Financial • Mental • Emotional • Spiritual • Must be good stewards in giving and not borrowing before investing • Sadly – many investors are also deeply in debt • Guaranteed 18% risk free return – pay off credit card Someone with $millions in investments can be in more bondage than someone with none

22. Guidelines for Investing (p. 363) • AVOID DISATEROUS INVESTMENTS • Get Rich Quick schemes offer huge returns for seemingly little risk • Real Estate elsewhere, Gold in the Yukon • New microchip, Cure for cancer • Engine that runs on water, Skunk Farms • Typically from a “friend” (who heard it from a cousin, whose brother-in-law is a financial wizard who says this is the next Microsoft) • Makes you feel like he’s doing you a favor • Must make decision quickly • Christian investment firm seminars at Christian colleges or churches • Often disappear after they have everyone’s money • Randy’s small group study – 4 of 6 couples had disastrous stories • 1 - Lost entire retirement in one bad investment • 2 – Condos – lost nearly all their money • 3 – Huge losses in a risky investment • 4 – co-signed for a respected Christian business man who didn’t pay • Years later, he has a tremendous salary, living affluently, hasn’t repaid • Not just the financial loss – time and energy, emotions and relationships • Christians are more gullible with other Christians • Especially bad when pastors and Christian leaders become involved • Not all losing investments are dishonest • Can be honest but unwise • Can be unwise and make money • Can be wise and lose money • Some think the law protects them • Many bad investments are honest • Many dishonest investments are leagl

23. Guidelines for Investing (p. 363) • OBTAIN WISE COUNSEL • I will bless the LORD, who hath given me counsel: (Psalm 16:7) • Thy testimonies also are my delight and my counsellors. (Psalm 119:24) • Scripture is the most valuable counsel, but other wise counselors can also help • For wisdom is better than rubies; and all the things that may be desired are not to be compared to it.( Prov. 8:11) • The way of a fool is right in his own eyes: but he that hearkeneth unto counsel is wise. (Prov 12:15) • Without counsel purposes are disappointed: but in the multitude of counsellors they are established. (Prov. 15:22) • Hear counsel, and receive instruction, that thou mayest be wise in thy latter end. (Prov 19:20) • The words of wise men are heard in quiet more than the cry of him that ruleth among fools. (Eccl 9:17) • Seek many, not just one – but quality, not just quantity • Godly counsel (Prov 9:10, Psalm 1:1) • God’s counsel (James (1:5) • Easier to find Christian Financial Counselor than Biblical one • Fee-based are usually best (no vested interest in YOUR decision) • Studies show No-load funds perform as well as Load • Randy asked to advise two wealthy widows on what ministries to support • Ground-rule: Nothing for Randy’s material benefit • Once you’ve received counsel, it’s YOUR decision

24. Guidelines for Investing (p. 363) • CONSULT YOUR MARRIAGE PARTNER • a prudent wife is from the LORD. (Prov. 19:14) • Many foolish loses come from husbands not consulting (or listening to) their wives • 4 of 5 wives will be widows • Essential to include her • Things both spouses should know about • The will, trust • Bank accounts and investments • Insurance policies • VA and Social Security • Financial ignorance just after spouse dies is one more pressure she doesn’t need • The Best Gift • Write a letter • Leave instructions • Points of Contact • Godly Counselors

25. Investing Principles Based on the Best Selling Book, By Austin Pryor

26. An Overview of the SMI four levels(from “Jump Start”)

27. The SMI Road Map (p.4) • Section 1: Getting Debt Free • Section 2: Saving For Future Needs • Section 3: Investing Your Surplus • Section 4: Diversifying For Safety • Section 5: Retirement Countdown • Section 6: Investing That Glorifies God

28. Section 3: Investing Your Surplus (p.97) • 9 – What Investing Is/Why It’s Simple • 10 – What Mutual Funds Are • Their Advantages To Investors • 11 – How Mutual Funds Are Sold • 12 – Necessary Cautions • 13 – Income Taxes and Mutual Funds

29. 9 – What Investing Isand Why It’s Simple (p. 99) • It’s Simple: You have two Choices • Choice #1 - Investing by Lending • Lower risk – avoid locking in poor rates of return • Banks, Governments, Large Corp., insurance • Choice #2 - Investing by Owning • Higher risk – Economic outlook is important • Common Stocks, Real Estate, Precious Metals, Collectibles • Asset Allocation: % lending + % owning = 100% • has the greatest impact on return Section 3Investing Your Surplus The greater the return, the greater the risk

30. 10 – What Mutual Funds Are Their Advantages To Investors (p. 107) • For most, best way to assemble well-balanced, diversified portfolio • Big pool of money with thousands of investors • Able to gain advantages normally only available to wealthy investors • Managed by a hired professional paid by size of fund (sometimes on performance) • Invested by “ground rules”, usually a particular kind of stock or bond Section 3Investing Your Surplus

31. 10 – What Mutual Funds Are Their Advantages To Investors (p. 107) • Mutual Funds are Easier and Safer • Reduce risk via diversification – less volatile, more predictable • Commission Costs are low • Full-time daily professional management • Past performance is public record • Efficient reinvestment of dividends • Convenient services • Automatic investing, check writing, tax reporting, safety • Useful for IRA’s and other retirement plans • Can sell shares on a daily basis Section 3Investing Your Surplus

32. 11 – How Mutual Funds Are Sold(p. 117) • “Load”: Up to 8.5% goes to the sales person • Not typically reflected in reported returns • “No-load” – sold to investors directly • 100% of each dollar goes to work for the investor • On going Costs: • Management fees (All) • All Funds have Operating Expenses • ~ 70% of funds charge marketing fees (12b-1) • Average “expense ratio” is 1.6% • about $16 for every $1000 invested Section 3Investing Your Surplus

33. CAUTION 12 – Necessary Cautions (p. 127) • Fund Field is crowded and competitive • Many funds are taking on extra risk • Industry system for classifying risk is subjective • Open to misinterpretation and abuse • Red Flags • 1: Can’t accept “investment objective” at face value • 2: Can’t accept “diversification claims” at face value • 3: Can’t accept “implied performance” at face value • 4: Can’t accept “fund rankings” at face value • YOU must take responsibility • Learn to read the “prospectus” Section 3Investing Your Surplus

34. Example of Carefully Chosen Advertised Performance

35. Section 4: Diversifying For Safety (p. 145) • 14 – The Basics of Bonds • 15 – Stock Market Basics • 16 – Just The Basics Strategy • 17 – Selecting Your Portfolio Mix • 18 – The Road To Financial Security • 19 – Systematic Strategies • For Meeting Long-Term Investment Goals • 20 – Making The Transition • From Where You Are Now

36. 14 – The Basics of Bonds (p. 147) • Bonds are merely long-term IOUs • Promise to Pay at a specific time in the future • Fixed rate of interest that doesn’t vary • Higher risk than money market due to longer maturity • Two Major risks (both can be neutralized) • Credit worthiness • Use mutual funds to diversify • Interest Rate Risk • Use shorter maturities Corporate Bonds Section 4Diversifying For Safety

37. 15 – Stock Market Basics (p. 163) • Stock shares are part ownership in a business • Company growth and Dividends • “Market” fluctuates with supply and demand • Two major risks (and mitigations) • Company Failure: (selection & diversification) • Economic Downturns: (don’t sell in a panic) • Bull and Bear Markets • Market Timing not recommended for the “average” investor Section 4Diversifying For Safety

38. How SMI Categorizes Stock Funds for Risk • Know the average company size and manager’s “style” • Large companies safer • Small companies have greater potential gains • “Value” style more conservative than “growth” • Lowest risk/reward are Large Co. /value funds • Highest risk/reward are Small Co./growth

39. 16 – Just The Basics Strategy (p 177) • 80% of managers fail to “beat the market” over time • Loser’s game – He who makes the fewest mistakes wins • ”Index” funds try to reflect various indices • e.g. SP500, NASDAQ, etc. • Perfect for the loser’s game • “Just-the-Basics” uses no-load stock & bond index funds • “Allocation” is most important decision • Also includes international component • Advantages: • Focus on asset allocation • Guard against sub-par returns • Lower expenses • Fewer Taxable Distributions • Easy Accessibility • Update annually Section 4Diversifying For Safety

40. 17-Selecting your Portfolio Mix (p. 189) • We all have “money personalities” • Four Temperaments reflect emotional reactions to “risk” • Preserver, Researcher, Explorer, Daredevil • The four financial phases of life • Laying the foundation (up to 40’s) • Accumulating assets (40’s and 50’s) • Preserving assets (60’s and 70’s) • Distributing assets (75 and beyond)

41. 17 – Selecting Your Portfolio Mix( p. 190) • “Temperament” & “Season of life” determines how much risk is appropriate

42. Comparing “Just-The-Basics” and Upgrading Strategies • Some years the upgrading strategy has beat the market … some it hasn’t

43. 18 – The Road To Financial Security (p. 199) • 6 key principles for Investment Strategy • Diversify, Diversify, Diversify • Objective rules for decision making • Stay within your emotional comfort zone • Acknowledge current financial limitation • Start investing in small amounts. • Be realistic about returns to expect • Open a Vanguard account for “Just The Basics” • Avoids the “Red Flags” • Only other action needed is “annual rebalancing” Section 4Diversifying For Safety

44. 19 – Systematic StrategiesFor Meeting Long-Term Investment Goals(p. 211) • Dollar Cost Averaging • Same amount of money in same investment as regular intervals • Buy more when market down, less when up • Value Averaging • Varying amount monthly to meet overall goal • Buy even more when down, even less when up • Strict Buy/Sell Discipline- • Disciplined strategy protects you from: • unexpected swings in the market • Your emotions Section 4Diversifying For Safety

45. 20 – Making The TransitionFrom Where You Are Now (p. 223) • Remodeling your Portfolio • “Right” moves aren’t just based on maximizing profits. • Can’t position to always maximize profits • Be consistent with sound long-term strategies • Pray and seek experienced Christian counsel • You must understand it • Must pass the “Prudent” and “Common Sense” tests • Be consistent with your risk tolerance Section 4Diversifying For Safety

46. 20 – Making The TransitionFrom Where You Are Now (p. 223)

47. Investing with a Sound Mind • Investments and Biblical Principles (p. 356) • Values Based Investing (p. 357) • How much risk is appropriate? (p. 360) • Is investing Gambling? (p. 361) • What am I investing? (p. 362) • Guidelines for Investing (p. 363)

48. Follow-On • Sound Mind Investing • Handbook • Newsletter • Web Page