Retirement Investing Strategies and Articles

What is Faith-Based Investing?

by Retirement Tips

Nov 22, 2022

There are many approaches to investing. Some people like to invest in value stocks or exchange-traded funds (ETFs), others like growth stocks and some prefer bonds. Index Investing and sector investing are also popular approaches.

Still other investors and savers utilize a faith-based philosophy for investing. This approach has broader implications than one would assume at first glance.

Within Christianity, the concept of faith-based investing goes much further than deciding on certain stocks, mutual funds or ETFs. There is an entire movement dedicated to Biblical investing and some famous pundits have come out of that movement like Dave Ramsey, whose principles have reached far beyond people of faith.

Many of those principles are the same as taught by many financial advisors about good, proven money-management practices, responsible limitations on debt and embracing Socially Responsible Investing (SRI). The Christian-focused adaptation of SRI is called Biblically Responsible Investing (BRI).

The concept of faith-based investing can describe the actual investment instruments, the choice of stocks or funds or the totality of a practitioner’s money-management approach. It can include the avoidance of so-called “sin stocks” or the stocks of companies that manufacture or distribute things that go against Christian values, a focus on the stocks of certain market segments and industries.

Sector Investment Options

There have even been mutual funds and ETFs that have evolved out of this investment approach. These funds accommodate the faith-based investor by allowing diversification while doing all of the homework to include appropriate stocks.

There are funds created for this purpose that appeal to Christians, Muslims and Orthodox Jews. Some examples include the FIS Biblically Responsible Risk Managed Fund and the Ave Maria funds that appeal to Christians and the Amana mutual funds that appeal to Muslims. There are
some similar criteria employed by all of these funds, that would appeal to people of several faiths.

From a money-management perspective, Christians believe that they are stewards of the resources that God has given them. It is their responsibility to make responsible choices with that money.

Just as a trustee has a responsibility to be a good fiduciary and handle money with care and forethought; the same premise is required of the faith-based investor. This thinking permeates every decision in faith-based investing and determines both the approach to managing money as well as the investment choices.

Some studies have suggested that “religious households” are more likely to save than non-religious households. These traits are often handed down intergenerationally. This would indicate that there is a segment of the population with interest in faith-based investing.

In a study by the Christian Investment Forum, which tracked the returns of both Christian and secular equity funds over a 15-year period ending in 2020, they found that the Christian funds showed a statistical edge.

For people of faith, the faith-based investment approach allows them to align their money with their values.

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