The Beauty of Exchange-Traded Funds with Deirdre Gibson

This faith and finance podcast is underwritten in part by Praxis Investment Management. Since 1994, Praxis has offered investment products designed to meet the practical needs of everyday investors while supporting positive change through impact strategies that go beyond screening. Guided by faith values, Praxis strives to make a positive impact on the world. Learn more at praxisinvests.com Exchange Traded Funds or ETFs are rapidly growing in popularity and not without cause.

Hi, I'm Rob West. ETFs offer investors an easy, cost-efficient way to diversify their portfolios. But what are they and what advantages do they offer over other investments? Deirdre Gibson joins us today to talk about ETFs and perhaps why you should consider putting some in your portfolio. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, it's a pleasure to have Deirdre Gibson on the program. She's a senior national sales consultant for Praxis Investment Management, an underwriter of this program. She's also an expert on ETFs. Deirdre, great to have you with us. Thanks so much. It's a pleasure to be here. Deirdre, it would be helpful to start by explaining what ETFs are and perhaps how they differ from mutual funds.

Sure, Rob, that sounds great. So I think mutual funds are a great comparison because similar to mutual funds, ETFs are funds that can hold a mix of stocks or a mix of bonds. A lot of people like to call it a basket. But there is some key differences and they start with the fact that ETFs are bought and sold on an exchange like the New York Stock Exchange. So when you go into your brokerage account and buy a mutual fund, your order is sent directly to that fund manager, whereas on the exchange, that means you can buy or sell ETF shares anytime during the day, just like a stock. And one reason that matters for investors is if the market is moving very quickly, you can make a quick decision to get in or out of your ETF holding. By contrast with mutual funds, you have to wait until the close of the day when the final prices for all of those underlying stocks or bonds are known and finalized. So on a day when the market makes big swings, that could be a big swing in the price that you pay or receive.

Yeah, that's really helpful. And one of the reasons, of course, for their popularity, Deirdre, is that they're more tax efficient than mutual funds. I'd love for you to explain that idea as well.

Sure. So when you buy shares of a mutual fund and you send your money to the fund manager, that fund manager has to use your cash to buy more shares of the underlying holdings. And when you sell your shares, they sell some of those underlying holdings in order to give you your money back. All of those stock purchases and stock sales are taxable events, and those taxes get passed on to the mutual fund shareholders. By contrast, when more shares of an ETF are needed on the stock exchange, they're put there by a third party that trades a basket of stock shares in exchange for a bunch of shares of the ETF. And those are considered like for like trades, and so they're not considered taxable events. And that allows ETF fund managers to pass along far fewer taxes to their shareholders.

Yeah, that's really helpful. And again, one of the advantages of investing with exchange traded funds. Now, how do they help an investor diversify and even reduce risk? That's an area where ETFs are very similar to mutual funds. By investing in many different stocks or bonds all at once, you can spread out your risk.

So that means if one investment is losing values, another might do better, and that helps to balance out your overall portfolio. This is especially true for ETFs that invest across broad market indices rather than in a single industry or sector. Yeah, and then there's something called liquidity, which is how easily you can access your funds.

So how does liquidity and then even what's called trading volume, how does that impact the performance and even the pricing of these ETFs? That's a great question, and that's one of these areas where trading on the exchange makes a big difference. I want you to think about the opening of the stock exchange being like starting your car on a cold morning. So when it first opens, which is 9 30 a.m. Eastern Time, stock trading starts up, but it is slower.

And this is also true in those last few minutes of the day as it's winding towards the close, which is at 4 p.m. So when many people are trading in an ETF or trading in its underlying holdings, it's easier to buy or sell it at a fair price. So that's one tip that ETF investors can use to get the best price for buying or selling your ETF. You want to try to avoid those first and last 10 minutes or so of the trading day.

Yeah, that's really helpful. Well, we're talking ETFs today. That's exchange traded funds, a growing and popular investing tool that perhaps you should consider for your portfolio. With us today, our friend Deirdre Gibson. She is senior national sales consultant for Praxis Investment Management, an underwriter of this program. And when we come back, Deirdre will talk to us about not only the benefits of exchange traded funds, but how you can invest in a way that aligns with your Christian values using ETFs as well. We're talking exchange traded funds on faith and finance. We'll be right back after this break. Stick around. Where you can ask questions, get answers and share what you're learning.

Go to FaithFi.com and click the word app to get started. We are grateful for support from Praxis Investment Management. Since 1994, Praxis has offered investment products designed to meet practical needs for everyday investors seeking to steward their assets consistent with their desire to promote positive social and environmental impacts. Praxis aims to bring a faith-based approach to ETFs, mutual funds, multi-fund portfolio solutions and money market accounts reflecting their 500-year-old Anabaptist Christian faith tradition. More information is available at PraxisInvest.com. Great to have you with us today on faith and finance.

With me today, Deirdre Gibson. She's senior national sales consultant for Praxis Investment Management, an underwriter of this program and a leader in faith-based investing. Deirdre is an expert on exchange traded funds, and this is a really easy and cost-efficient way to diversify your investments and ETFs are rapidly growing in popularity. And before the break, Deirdre shared with us some of the reasons why I want to continue to unpack that Deirdre. Just give us kind of an overview and what should investors consider when choosing an ETF?

Yeah, thanks for asking that, Rob. One of the most important and exciting differences between ETFs and mutual funds is that it's possible to create an ETF basket that holds other things beyond just stocks or bonds. More complex things like options or commodities or other alternative investments that frankly normally would be out of the reach of a regular retail investor.

That's exciting, but it comes with some dangers. There are lots of ETFs that are more plain vanilla and there are some that could come in some really spicy flavors. Historically, most ETFs have been in that plain vanilla category, but a lot of the newer ones coming to market are a little more spicy.

I want to give an example just to show what that means. So you might be thinking, hey, the price of gas keeps going up. I'm going to invest in an oil futures ETF, so at least the more I pay at the pump, the more money I make.

A lot of people have thought that. But futures contracts are complicated and those oil futures ETFs do not actually rise at the same rate that oil prices rise. So if you don't really understand the underlying holdings of the ETF you're getting, you might get surprised. Now the good news is, by law, every ETF issuer has to have really clear information on their approach and their holdings on an every single day basis on their website. So just go to the ETF issuer's website and make sure you understand what you're reading. If you don't, no worries, just keep doing your homework.

It is exciting to be able to access some of those more spicy flavors, but you just want to make sure that you know what you're getting into. Yeah, that's exactly right. And so that's a great example with the oil futures.

Another very popular ETF are the gold ETFs, right, where you can own the price of gold as it moves up and down, but without the complexity of receiving it and securing it and then paying dealers to buy and sell, right? Exactly. Yeah. Now let's talk about the faith-based investing space because historically the faith-based investments have largely been in the mutual fund category, but that's really moving into the exchange-traded funds as faith-based firms correct this imbalance. I'd love for you to share what Praxis is doing about it.

Yeah, absolutely. We are so excited that this month we launched two new Praxis ETFs. The Praxis Impact Large Cap Growth ETF, which has the ticker PRXG, so PRX for Praxis and G for growth, and the Praxis Impact Large Cap Value ETF, so PRXV. Both of these funds are designed with timeless Christian values in mind. As shareholders, we are able to have a seat at the table helping these companies care for God's creation and God's people better, but we screen out companies where we think it's better just to shake the dust. We've been investing with these values and principles for over 30 years, and one of my favorite stories from that time is about how we helped Hershey and a bunch of other chocolate companies address child slavery in their supply chain. So today you can go to the store and buy any random Hershey bar, and it is certified by third-party auditors. That's because of work that was done by my colleague Chris Meyer and a bunch of others. That's incredible. I'd love for you to share just a bit more about that and how an asset manager like Praxis can actually make a difference in changing how they think about their supply chain.

Oh, yeah. So there's really three ways, and I'll start by going a little higher level with approaches to faith-based investing or any approach to values-based investing, really. You can choose to avoid or screen out from your portfolio companies that aren't really aligned with your values. You can choose to seek or add in companies that are having an outsize positive impact or blessing on the world. And then you can choose, typically you would not do this yourself, but you would choose a fund manager that is engaging with companies to make a difference. Most of the asset managers in the faith-based space really have a strength in one or more of these areas.

At Praxis, we think that we can have the greatest impact by really incorporating a lot of different approaches. So we do screen out some things, but then we look for other opportunities to change the world through the investments that we end up making. And having these company engagements is an important part of that. So with your colleague, Chris, that helped Hershey and these other chocolate companies address child slavery, was it really just pointing out that this existed?

And was that the primary opportunity or some other way you engage them? It starts off with that. Sometimes companies are aware and sometimes they are not aware of issues that might be happening deep in their supply chain. It often is a multi-year engagement where you build up trust over time and you are the subject matter expert bringing in information from the field.

They also end up trusting us to bring information from other companies because you can't just always call up your competitor and say, hey, what are you doing about this? Sure. But if you can do as we did a multi-year engagement in partnership with other investors and working across multiple companies, you can lift all of the boats, so to speak, in an entire industry. Oh, that is so exciting. Now, I know you all focus on impact themes each year, and I love reading your impact report every year to see the incredible work that's being done. Is there one of those themes you could share for 2025? Oh, yes. So, these engagements are multi-year engagements, and so we're adding a new theme this year that I see continuing for quite a while.

And it's one that's very near and dear to my heart as a mother of a five-year-old, a three-year-old, and a one-year-old. I think a lot about what the future is going to look like, and I think a lot about how it's going to be changed by the rise of AI, the rise of quantum computing. We're just seeing massive changes in technology.

No doubt. And to me, it is so vital to have Christian voices and values-driven people at the table with these companies, making sure that our future isn't just shaped by, hey, what is possible? What can we do? But also, what do we want to do?

What kind of world are we trying to create? And really keeping human flourishing at the center of the conversation. Well, and having Christian thought leaders at that place to have that conversation is so essential. Now, Deirdre, if somebody's listening today and they're not making their own investment decisions, but they work through an advisor and they're hearing about the great things that are being done at Praxis and their impact and engagement, even these two new ETFs that you've rolled out, how would you suggest they engage their advisor around this conversation if they don't have these types of investments in their portfolio right now? Just bring up the conversation. Your advisor has your best interests in mind, and that means helping you align your finances with your life goals, and your life goals have everything to do with your values and your faith. Just bring up the conversation.

Let them know that you're interested, and I'm sure that your advisor will be happy to help you move forward. Now, they're going to have concerns about how this impacts your financial ability to meet those goals. They might not know that there are lots of opportunities out there to include both values and financial considerations when choosing faith-based or values-based investments. Yeah, I think that's a great point, and we have just a few seconds left, but the idea that we don't have to sacrifice returns to have our values expressed in our portfolio is absolutely true, isn't it? That's right. There are values-based and faith-based opportunities in every risk-return profile.

It just means finding the investments that suit your risk-return profile. Excellent. Well, Deirdre, we so appreciate your time and our partnership with Praxis. Thanks for being here today. It's a pleasure, Rob.

Thank you. That's Deirdre Gibson with Praxis Investment Management. You can learn more at praxisinvests.com. That's praxis, P-R-A-X-I-S, invests.com. All right, your questions are next. 800-525-7000, that's 800-525-7000.

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To Chattanooga. Hi, Sarah. Go ahead.

Hi. Yes, I have a pretty stable budget, and I do monthly a donation to a charity, and I have been paying extra on my principal. But my question is, should I do those items before I build my emergency savings? Yeah, it's a great question, and you're talking about the priority use of God's resources, and there's competing priorities that we have. I mean, once we recognize our role as stewards and we begin to think about our values and our priorities, what will emerge is having that liquidity or that emergency reserve for the unexpected.

We see that affirmed in Scripture. Clearly, we're to be generous. We should be givers. We should allow a portion of what God entrusts to us to flow through us into the local church and other causes that are on the heart of God, even loving our neighbor, those who might be in a season of need.

Beyond that, we want to minimize the use of debt and eliminate high-interest credit card debt and consumer debt, and even find our way toward paying off a mortgage eventually. So we have to wrestle through the priority order of these things. First of all, I would say being a generous giver right up off the top is key. And the amount is really between you and the Lord. That's of less concern to me. What's most of interest to me is you beginning to establish that regular rhythm of giving and generosity, and I heard you reference that.

And so I would say building that right in up front, it kind of calibrates your hearts to the Lord's, and I think it's that tangible demonstration of surrender and trust in Him as your provider. So I would say continue doing that, and you work out the amount in prayer with the Lord. In terms of where you go from there, what do you have in your emergency fund today? Today, I have about $3,000 in my emergency fund. Okay, and what are you spending on a monthly basis, roughly, all your expenses? Okay, on a monthly basis, my expenses are like $2,500. Okay, great. So you have a little more than one month's expenses.

That's excellent. On your way to three to six months. Did you mention you have a little bit of credit card debt, though? I have $500 in credit card debt. Okay, and is that just monthly expenses that you'll pay off, or are you carrying that balance month to month? Well, I'm able to pay it off because my monthly income is about $4,300, and my expenses monthly are about $2,500. Okay, yeah. So I can't just pay it off.

Okay, yeah, great. Now, where has the excess been going? Because you've got quite a bit of surplus there, I mean about $1,800 a month. The excess was going to paying out credit card debt and also doing extra on my principal. On the mortgage. Yeah, on the mortgage. Like, I'll pay three extra principals at one time after my regular monthly. And then also a little bit for, like, a plane ticket to my grandson's graduation.

Just stuff like that. That makes sense, sure. Well, a couple of thoughts here. Number one is, since you've, it sounds like you've reined in your spending, and whatever led to that credit card debt in the past is a thing of the past, that's good. I'd go ahead and finish off that last $500. No reason to pay the interest that you're likely paying on that $500. So let's go ahead and pay that off as step one. I would probably, if it were me, go ahead and build up that emergency fund from one month's worth of expenses to at least three. And so maybe you set a goal of $7,500. And I'd probably hold off on, again, neither of these things are bad.

It's just, you know, we've got to make a choice. I'd probably hold off on additional, you know, principal payments on the mortgage until you get up to that three months expenses. Just so you've got something to fall back on if for some reason you're, you know, you had an unexpected expense come out of left field, we would rather you not have to go back into credit card debt in order to cover that. And then if you wanted to take the excess and divide it between additional emergency savings to get up to 6%, and then take the other half and send it toward the mortgage, you know, I would be completely fine with that because I love the idea of you eventually being debt-free.

So I think that would probably be my path forward, focus entirely on the credit card debt and the emergency fund until you get up to three months, and then split the excess between the principal and the mortgage and the emergency fund until you get to six months. Okay, thank you. All right, you're welcome. We appreciate your call today. May the Lord bless you.

Well, folks, we're nearing the end of the program today. You know, as we think about applying God's wisdom to our financial decisions and choices, we want to look back to God's Word, and here's what we will find. You know, apart from the big idea that we're stewards and God is owner and He gives us the power to create wealth, I think we need to remind ourselves that there are plenty of admonitions in Scripture around how we should handle money, the fact that we should avoid debt, the importance of goal setting, the importance of paying our taxes, the fact that we should be training the next generation, our kids, in these principles and a biblical worldview of money management, and certainly living within our means.

And we want to remind you of those principles and ideas that are very practical but rooted in God's Word each time we gather together. And by the way, and speaking of living within our means, if you're struggling with that like I am and so many of us are in the midst of high inflation, check out the Faithfi app. It's what Julie and I use to manage our budget every day. And it's really helpful to know what's left in each envelope when you take a look at that app in real time. You can download it today at faithfi.com.

Just click app. Well, folks, that's going to do it for us. A big thanks to my team today, Devin Patrick, Robert Youngblood, Jim Henry, and everybody here at Faithfi that makes this possible. You have a great day and hope you'll come back and join us tomorrow. We'll see you then. Bye-bye. Faith in Finance is provided by Faithfi and listeners like you.