Church Resources - Objective Measure

Can Churches Invest in Stocks? A Practical Guide for Faith-Based Investing

17 September 2024

Annie

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Categories: Church Resources

Yes, churches can invest in stocks. Churches, like any other nonprofit organization, can use investment portfolios to grow their funds. This article will guide you through the legal implications, benefits, and strategies of stock investments for churches, ensuring they align with faith-based missions. So, then the question becomes: can churches invest in stocks effectively while adhering to their values?

Key Takeaways

Churches can invest in stocks and other financial instruments to enhance their financial portfolios while being exempt from federal income tax on gains and dividends.
A well-structured Investment Policy Statement (IPS) is essential for churches to define investment objectives, manage risks, and ensure alignment with their mission and values.
Engaging financial experts and diversifying investments helps churches navigate legal considerations, mitigate risks, and effectively support their long-term mission and community outreach efforts.

Can Churches Have Investment Accounts?

Yes, churches can have investment accounts, enabling effective fund management and financial growth. Nonprofit organizations, including churches, can invest in stocks to diversify and enhance their financial portfolios.

Churches can invest reserve funds to avoid the loss of value associated with savings accounts. Certificates of deposit (CDs) offer fixed interest rates and secure investment choices. Investment accounts and brokerage accounts in the money market are essential for strategic financial management, increasing revenue and supporting mission-related activities.

Churches are exempt from federal income tax on investment portfolio dividends and gains, substantially enhancing financial health. Well-managed investments can significantly support a church’s mission by funding various initiatives.

Benefits of Investing in Stocks for Churches

Stocks offer churches the potential for greater returns compared to traditional savings methods. Higher returns can significantly boost financial resources for mission-related activities and community outreach programs.

Diversifying a church’s financial portfolio through stocks reduces risk by spreading investments across various sectors. Diversification protects church funds from market volatility while promoting financial stability and sustainability.

Investments diversify funding sources, reducing reliance on donations (and tithes). A robust investment strategy enhances financial sustainability, ensuring support for the church’s mission and operations long term.

Legal Considerations for Church Investments

Compliance with federal and state securities laws ensures ethical fundraising and investor protection. The securities and exchange commission and state securities commissions oversee securities sales to prevent fraud. Churches must align investments with these regulations.

Violating securities laws can result in fines and potential lawsuits for churches. Church leaders must be aware of legal requirements and ensure compliance.

Church securities are not automatically exempt from registration; each case must be evaluated based on state laws and the Uniform Securities Act. Seeking legal counsel is crucial when navigating church investments.

Developing an Investment Policy Statement (IPS)

An Investment Policy Statement (IPS) outlines the investment strategy and sets clear objectives and criteria for an organization’s investments. Every church should have an IPS to manage long-term funds in line with its core values and mission.

Drafting an IPS involves defining investment objectives, desired diversity, portfolio composition, and performance measurement criteria. Assessing the church’s financial situation and mission objectives helps develop tailored investment strategies.

Regularly reviewing and updating the IPS ensures alignment with evolving goals and beliefs. Risk management processes require ongoing commitment and regular evaluation to adapt to new challenges. Reviewing the IPS every three to five years is recommended.

An IPS can be concise, sometimes just a single page, to effectively communicate investment management needs. When it comes to an Investment Policy Statement, simplicity helps maintain clarity and focus on financial goals.

Choosing the Right Investment Strategies for Churches

Selecting appropriate investment strategies is crucial for churches to achieve financial goals while aligning with their mission and values. Factors such as timeline, other revenue sources, and risk tolerance must be considered when selecting investment strategies.

Churches can explore investment strategies focusing on growth, value protection, and asset accessibility. ‘Risk-free’ investments usually yield lower returns, so realistic expectations are essential. Periodic reviews of investment strategies ensure alignment with changing circumstances and investment goals, as well as effective use of investment resources.

Flexible investment vehicles like Building Fund Certificates allow access without penalties, making them suitable for long-term financial goals. Higher balance minimums imposed by traditional brokerage firms can limit investment opportunities for smaller churches. Consulting a financial advisor helps churches make informed investment decisions.

Value-Based Investing

Value-based investing (or faith-based investing) aims to maximize returns while aligning with personal or religious values. This approach prioritizes socially responsible companies reflecting investors’ values, avoiding sectors like tobacco, gambling, or adult entertainment (as examples).

Faith-based investing promotes financial growth while ensuring alignment with religious and ethical standards. This approach reflects diverse faith traditions, helping churches uphold values while pursuing financial goals.

Diversification

Diversification involves spreading investments across various asset classes and sectors to reduce risk. This strategy manages risks associated with market volatility and economic downturns.

A well-diversified portfolio promotes balanced growth, stability, and potential returns for churches. Diversifying investments helps churches protect financial resources while pursuing long-term goals.

Long-Term Investments

Focusing on long-term investments helps churches achieve financial stability and support their mission and operations in the future.

Long-term investment strategies provide financial stability by generating consistent returns over time. These strategies often support future church initiatives and projects and require additional investment. The process involves selecting options that align with the church’s mission and financial goals. Some long-term investment options include mutual funds, bonds, and other securities offering stable returns.

Engaging Financial Experts for Church Investments

Advisors with nonprofit experience help churches avoid pitfalls and align investment strategies with their mission.

Engaging financial experts helps churches make informed investment decisions and enhance financial stability. Investment advisors specializing in nonprofits provide tailored guidance, enabling better investment choices for churches and ministries. If your organization opts to work with an advisor, do your homework and make sure they’re familiar with the laws, standards, and compliance requirements for your situation.

Risk Factors and Management

Allocating funds to strategic investments positions churches to respond to unexpected financial challenges.

Investments through Church Investors Fund are not FDIC insured and carry inherent risks. Common risks include investment fraud and market fluctuations influenced by economic conditions, market sentiment, and geopolitical issues. In these scenarios, churches can mitigate potential losses through risk avoidance, prevention, and frequent backups of critical data.

Impact of Investments on Church Mission

A well-managed investment strategy helps nonprofits achieve project funding and long-term financial sustainability.

Church investments can, for example, fund building projects and renovations for church facilities. Investments can also fund significant community outreach programs and enhance church mission efforts. Effective management of investment funds helps churches support a range of projects that align with their mission. Engaging financial experts in this process provides comprehensive investment plans that factor in the ethical implications and financial stewardship implications of the decisions.

Summary

Strategic financial management through investments can significantly enhance a church’s ability to support its mission. By understanding the types of investment accounts available, the benefits of investing in stocks, and the legal considerations, churches can make informed decisions.

Developing an Investment Policy Statement (IPS) and choosing the right investment strategies (such as value-based investing, diversification, and long-term investments) are crucial steps, and engaging financial experts and managing risks effectively can further support the church’s financial health. Ultimately, well-managed investments can provide the financial stability needed to fund important initiatives, support community outreach programs, and ensure long-term sustainability.

Leading Others to the Hope of a Financially Free Life

5 September 2024

The Brand Office

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Categories: Church Resources, Financial Literacy

In a world where financial anxiety can often overshadow the pursuit of meaningful goals, the concept of “financial freedom” stands as a beacon of hope. But what does it truly mean to live financially free, and how you can you help your community pursue it? For many, it’s more than just having enough money—it’s about the freedom to make choices that align with personal values, dreams, and the ability to give back to the community. This journey to financial freedom is not defined by a single number in your bank account but by the confidence, resilience, and opportunities that come with it.

Financial Anxiety vs. Financial Confidence

Financial anxiety is a burden that many people carry, often fueled by uncertainty about the future or a lack of financial education. This anxiety can paralyze decision-making, and lead to missed opportunities or a constant state of stress. Pastors, and other organizational leaders, have the power to transform this narrative for their communities by fostering financial confidence through education, resources, and support.

Confidence in financial matters doesn’t come overnight; it’s built over time through learning and experience. By equipping yourself and others with the knowledge needed to make informed decisions, you can replace anxiety with confidence. Imagine a community where individuals feel empowered to manage their finances effectively—this is the foundation of financial freedom.

Financial Freedom: A Journey, Not a Destination

It starts with education—understanding the basics of budgeting, saving, and investing. Leaders play a critical role in guiding their communities through this learning process, providing resources like our Investment Essentials Course to build a strong financial foundation. Education alone, however, is not enough. Experience is the next crucial step.

As individuals begin to apply what they’ve learned, they encounter real-world challenges and opportunities that shape their financial perspectives. Leaders can support this growth by encouraging active participation in financial planning and decision-making. This involvement helps to develop resilience—the ability to adapt and thrive even in the face of financial setbacks.

Supporting Your Community: Resources and Conversations

For pastors, your role goes beyond teaching—you’re also guiding and counseling your congregations; similarly, your influence extends beyond your personal financial journey. You have the opportunity to create a ripple effect, positively impacting the financial well-being of those around you. Start by facilitating meaningful conversations about money—discuss the importance of setting goals, understanding financial tools, and envisioning what “enough” might look like for each individual.

Remember though, “enough” is not a number—it’s a vision of what financial freedom enables. Whether it’s the ability to travel, retire comfortably, fund a child’s education, or contribute generously to causes that matter, the goal is to define what truly enriches life. By helping individuals articulate these goals, you empower them to take actionable steps toward financial freedom.

Providing access to educational resources, such as workshops or courses, can also make a significant difference. These tools equip individuals with the knowledge and confidence to pursue their financial goals. The Investment Essentials Course is one such resource that offers a comprehensive introduction to investing, tailored to meet the needs of those who are ready to take control of their financial future.

Living Financially Free: Beyond the Numbers

Financial freedom is not just about accumulating wealth; it’s about what you can do with it. It’s the freedom to make choices that align with your values, to take risks that lead to personal and professional growth, and to give back in ways that are meaningful to you. For some, it might mean retiring early to spend more time with family; for others, it might involve starting a business or supporting family members during a difficult season.

As a leader, you can help others see that financial freedom is attainable through a combination of education, experience, and thoughtful engagement. By shifting the focus from “How much is enough?” to “What will I do with enough?” you encourage a mindset that values purpose over accumulation.

The Opportunity for Generosity and Growth

Ultimately, living financially free opens up a world of possibilities. It’s not about having endless resources but about having the confidence and resilience to use what you have wisely. It’s about being able to give back, pursue passions, and support the people and situations that matter to you.

As you guide your community on this journey, remember that financial freedom is closer than many realize. With the right education, support, and mindset, anyone can begin to move towards a life where money is not a source of stress but a tool for achieving their most cherished goals.

8 Takeaways from Bob Merritt on Engaging Major Donors

21 August 2024

The Brand Office

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Categories: Church Resources, Financial Inspiration

At the Global Leadership Summit, a powerful discussion took place between Objective Measure’s founder, Fred Martin, and retired Eagle Brook Pastor, Bob Merritt, on a topic that’s crucial for all church leaders: engaging major donors.

At the start of the conversation, Bob inquired about Fred’s experience learning to fly planes, wondering how the lessons there might also apply to church finance and fundraising. Fred instantly jumped to the “Margin of Safety” principle – a cushion that protects you when inevitable difficulties arise. This principle is as applicable in ministry as it is in aviation: with a solid foundation, a clear vision, and a gameplan for responding to emergencies, you can avoid major catastrophes and navigate smaller challenges with confidence.

Fred’s perspective as both a benefactor and financial expert, combined with Bob’s pastoral insight, revealed several other transformative ideas and specific strategies for building meaningful relationships with those who have the capacity to give big. Here are Bob Merritt’s eight key takeaways from the conversation, which will help you effectively develop relationships and navigate conversations with major donors in your own community.

1. Build Trust Through Relationships

Every church has individuals within their community with significant financial resources. As a leader, your first responsibility is to get to know these people personally; build genuine relationships rooted in trust. Donors need to know you’re not just interested in their money but in them as people. Trust is the foundation on which all giving is built.

2. Cast a Compelling Vision

Wealthy individuals are going to give their money somewhere—whether to universities, charitable organizations, or other causes. Your job is to make a compelling case for why your mission matters most. You need to communicate that reaching people for Christ is the greatest cause and one that offers them the best return on investment. Your mission must be clear, inspiring, and focused.

3. Lead by Example

Big donors often give because they believe in the leader. They’re looking at you—evaluating your character, commitment, and capacity to lead. They want to know if you’re in it for the long haul and if you’re leading by example. As a senior pastor, you need to be the first to step up in giving, demonstrating that you’re fully invested in the mission.

4. Simplify and Clarify Your Plan

When approaching major donors, your plan needs to be clear, and the numbers must make sense. Donors appreciate clarity. Rehearse your presentation, use visuals to showcase your architectural plans, and make it easy for them to understand what you’re trying to accomplish and why. Simplicity and consistency will go a long way in earning their trust and support.

5. Appeal to Their Desire for Impact

Donors with significant wealth aren’t interested in funding something that doesn’t make a difference. They want to know their money will have a substantial impact. Align with their desire to contribute to something that truly matters and show them how their gift can be transformative within your community.

6. Present Giving Levels Without Pressure

Bob shared that he rarely asked for a specific amount when engaging potential donors. Instead, he encouraged them to pray about what level might be theirs to give at. This approach respects their autonomy and invites them into a spiritual process, making the decision more meaningful.

7. Prioritize Development

If engaging major donors isn’t a specific part of someone’s job, it’s unlikely to get done effectively. Consider hiring a development person whose sole focus is to build and maintain these critical relationships. A dedicated professional will ensure that your efforts to engage major donors are intentional and consistent.

8. Don’t Panic in the Process

Fundraising can be daunting, and there will be moments when it feels like nothing is working. Bob admitted that he wanted to quit every fundraising campaign his church ever did. But persistence is key. Fundraising can be non-linear and often, gifts come from unexpected sources. Success requires surrendering to the process and trusting that the work is worthwhile.

Engaging major donors is not about perfection; it’s about being intentional, relational, and persistent. Remember, if you don’t ask, they won’t give. Take these insights from Bob Merritt and Fred Martin to heart, and lead your church or organization toward a future of impactful generosity.