Introducing Our Enhanced Faith-Driven Portfolios: Aligning Values with Investing
At Sound Stewardship, we’ve always believed that investing is more than just about your financial goals. Your investing can also be a way to live out your values. That’s why we offer a variety of values-based portfolios to help clients harmonize their convictions with their capital.
We’re thrilled to introduce exciting updates to our Faith-Driven Portfolio Models. These portfolios are designed for the growing number of Christians who want their investments to match their beliefs. By incorporating advances in Biblically-responsible investing over the last few years, we are able to strengthen the integration of Biblical values within your portfolio.
Our Faith-Driven Portfolios combine three objectives with the goal of earning a reasonable rate of return:
- Avoid Harmful Business Practices
Values-based investing for Christians is more than just a financial strategy – it’s a conviction-driven approach that seeks to harmonize one’s investment choices with Biblical principles. It acknowledges that when we invest our God-given resources into companies, we have a stewardship responsibility as partial owners in those companies.
There are many industries where business models inherently conflict with the Christian faith. Our Biblically-responsible model has long adhered to these principles by excluding companies with inherently unbiblical activities. This means screening out businesses such as those profiting from destructive addictive behaviors or exploitative predatory practices. This ensures that your investments are reflective of your commitment to God’s teachings and contribute to a better world.
For an example of screening methodologies, check out Timothy Plan’s Foundational Principles.
- Embrace Positive Investment Themes
Our newly enhanced Faith-Driven Portfolios take this commitment a step further. Not only do they exclude morally objectionable industries, but they also embrace positive investment themes that resonate with Christian faith. By investing in companies that promote human flourishing, you actively contribute to the creation of a more just and compassionate world:
- Ethical Leadership: companies led by individuals who exhibit honesty, humility, and a sense of responsibility towards all stakeholders.
- Human Dignity: businesses that value human life, ensuring fair labor practices and upholding human rights.
- Social Responsibility: businesses aware of their impact in society, including those engaged in philanthropic efforts, community development, and support for marginalized populations.
- Environmental Stewardship: the importance of caring for God’s creation via companies dedicated to sustainable practices and eco-friendly innovations.
How we invest our resources is a reflection of what we prioritize in life. Guided by our Christian faith, values-based investing encourages companies to uphold virtues such as integrity, compassion, stewardship, and justice.
For an example of positive themes, check out Eventide’s Investment Ideals.
- Engage to Advocate for Change
Investing is not just about buying shares; it’s about becoming a part of a company’s journey. With our new faith-driven portfolios, you also become a shareholder advocate, leveraging your influence to drive positive change. The funds we utilize actively engage with companies in your portfolio, encouraging them to uphold ethical practices and make meaningful contributions to society. We have intentionally selected managers who are active in the following ways:
- Shareholder proposals
- Proxy voting
- Discussions with company management
This advocacy approach amplifies your voice as an investor and makes a real impact on corporate behavior. By holding companies accountable and pushing for better standards, you are contributing to the transformation of business practices from within.
How do you respond when a company demonstrates a disregard for your values? In some instances, excluding that business from your portfolio is the best answer – particularly if its business model is inherently antithetical to what you believe (see Avoid, above).
However, in many cases, it is not the core business practices in conflict with your convictions, but the way a company is behaving in the marketplace. By excluding this company, investors are effectively abandoning their influence on the items on which they disagree. They are giving up their voice!
Shareholder advocacy magnifies an investor’s voice by leveraging the power of larger groups. You gain influence unavailable to smaller investors when partnering in equity ownership with those who share your values. Through dialogue and participation in shareholder meetings, fund managers encourage positive change and hold companies accountable for their actions.
For an example of shareholder advocacy, check out the Praxis Advocacy Initiatives.
Who are Faith-Driven Portfolios for?
Obviously, these new portfolios are designed with Christians in mind, but not all feel convicted to utilize such a strategy. Likewise, non-Christians may appreciate and adopt the approach even if for differing reasons.
One problem that arises when adopting a values-based investment strategy is, “Whose values?” Your convictions may not 100% line up with an investment fund manager’s judgments. Even within a marriage, we often see clients’ differing opinions on where to draw the line around specific issues. There is no perfect way to implement a portfolio when diversifying across hundreds of companies, industries, and countries around the world.
Historically, Biblically-based funds have provided returns comparative to their secular counterparts. But there is no guarantee that they will continue to do so, particularly since there are higher expenses associated with such a portfolio. We have made fund selections with this in mind. However, it costs more to discerningly evaluate companies and engage in advocacy. For example, the average expense ratio of one of our Faith-Driven Portfolios can be double (0.50%) that of our secular Index-Based Portfolio (0.22%).*
If these portfolios aren’t right for you, your Wealth Advisors can look at other possibilities that may be a better fit:
- Passive Index Funds: our standard portfolio models utilize index funds to purchase large swaths of the investing universe. Although this method is low-cost, it has no regard for the types of companies / industries owned. For more, see our Investment Methodology Whitepaper.
- ESG Models: we also provide values-based portfolios focused on socially responsible investments centered around “secular” themes of environmental, social, and governance issues (ESG).
- Direct Indexing: we can provide an even more customized solution when appropriate, utilizing the direct purchasing of underlying companies instead of a mutual fund or ETF. This technique is not great for everyone, but it can provide unique benefits for those with large taxable investment accounts.
Our renewed Faith-Driven Portfolios are more than just financial tools – they’re a means to make a difference. By aligning your investments with your values, engaging in shareholder advocacy, and embracing positive investment themes, you’re creating a ripple effect that extends beyond the financial markets.
If this resonates with you, contact a Wealth Advisor today to discuss building a Faith-Driven Portfolio that stays true to what you hold dear. Your faith, your values, and your investments can now walk hand in hand.
Disclaimer: As with any discussion about investing, any particular strategy or investment may not be a fit for everyone. The information provided below is for informational purposes only and is not financial advice. Consult with your Wealth Advisor before making any investment decisions.
* This comparison is between an allocation of 60% equities / 40% bonds, as of 6/30/2023.
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