Five Things Christian Financial Advisors & Their Clients Should Know About Faith-Based Investing
Jerry Bowyer Chief Economist of Vident Financial, Editor of Townhall Finance, and President of Bowyer Research
- 2020 Feb 25
If Jesus is really Lord of all, then he is Lord of finance. However, all too often Christians who work in finance fail to think deeply about how to apply their faith to their financial services and the clients can be left without guidance about how the Bible might affect not just personal financial planning decisions such as problems with idolatry of money, excess spending, and the dangers of debt, but also how it might affect the investment portfolio itself.
- All investing is in some sense faith-based investing, because everyone has a faith. Muslims have faith in Allah as described in the Quran. Christians have faith in Jesus. Secularists have faith in human reason as the ultimate authority. There is no neutrality - all human activity, including investing, is based on a faith, even if that faith is not explicitly acknowledged.
- We'll focus here on Christian faith-based investing, because Christianity is the only true faith, and therefore the only proper basis for investing. It should inform both personal behavior and business practices. On the personal front, Christians working in investment are obligated to work to the glory of God, with excellence and honesty and within the confines of the Biblical moral codes by, for example, refraining from stealing, lying or adultery. Positively, all aspects of Christian investing, motivation, prudence, excellence should glorify God.
- Because there are widely available materials about Christians' personal behavior, we will focus on Christian faith-based business practices, as opposed to personal practices, in portfolio construction.
- The objective of portfolio management is to get a good return, to increase rather than waste or lose asset values. Decisions about how to invest for a good return are largely a matter of wisdom and prudence. Some embrace an approach based on academic consensus such as modern portfolio theory. Others look for advice from the most respected or credentialed experts. My personal approach is based on something we call 'principled reasoning'. And material about principled reasoning is already available here. Christians can quite reasonably disagree on such matters of prudence, such as valuation vs. momentum strategies, cap-weighted passive investing vs. active investing vs. rules-based investing, the role of sentiment vs. fundamentals, diversification vs. concentration, etc.
- In order to get a return, one must venture out into investment markets. Markets, like all human endeavors, are infected with sin, which means that Christians who work in investment must contend with issues of morality in the markets.
Next in the series we'll get a little deeper into the moral dilemmas which come about from investing in markets given that there is no place in the world without sin. We'll look at some important things that both Christian financial professionals and the folks they serve need to know about that.