30 Years of Faith-based Investing With Chad Horning

This faith and finance podcast is underwritten in part by Praxis Mutual Funds. They are a leading faith-based family of mutual funds helping people integrate their finances with their values since 1994. With Praxis, your investments can make a difference for you and the world around you.

Learn more at Praxismutualfunds.com. So whether you eat or drink or whatever you do, do all to the glory of God. 1 Corinthians 10, 31.

Hi, I'm Rob West. The apostle Paul sets the bar high with that verse, calling on Christians to glorify God in every part of life, and that certainly includes how we manage money. Chad Horning joins us today to talk about an important milestone in investing that honors the Lord. 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, we're always delighted to have Chad Horning on the program. Chad's the president of Praxis Mutual Funds and underwriter of this program and one of the oldest faith-based mutual funds in the country. Chad, I wasn't talking about you.

I was talking about the mutual funds. Great to have you back on the program. Great. Thank you.

It's always good to be here. Chad, so you're celebrating 30 years of faith-based investing, and that's of course a real milestone, and Praxis has really been instrumental in defining that term, faith-based investing. What does that mean to you and your team at Praxis? Well, there are a variety of ways to describe this work.

For today's discussion, I think we should just agree that faith-based investing is simply the idea that one's faith can inform your investment decisions in ways that lead to different decisions than if it hadn't. Yeah. Well, that's helpful and I think really clear as we just think about what this category represents. Now, we're talking about 30 years of history, so what has that looked like over these 30 years?

Sure. Yeah, I would say that at the beginning of this period, the hallmarks of faith-based investing included things like the avoidance of certain industries. That's been a part of this industry from the very beginning.

And why does that make sense? Well, if a Christian business person would be out there trying to start a business, they probably would avoid investing or starting a business in certain industries or selling certain products that don't match what their faith would ask them to do. The call to love one's neighbor as themselves would have many Christians avoid certain businesses that exploited their neighbors. And so that makes sense that as we invest, we would do the same thing. And as the investor has become more distant from the actual businesses, the same call to love one's neighbor still applies in our opinion. Wouldn't it make sense for an investor in a stock to avoid participation in businesses that exploited your neighbor? This thinking undergirds the way that many Christian investors want to practice their avoidance today.

Yeah, that's helpful. And obviously one key part of faith-based investing is this idea that we would avoid. Now, let me just follow up on one idea. And you said the investor has become more distant from the actual business. You're referring to buying stocks on the secondary market, perhaps directly or through a mutual fund. But describe what you mean by that distance from the actual business.

Sure. Yeah, that's exactly what I meant. Today, most investors participate through buying stocks or mutual funds.

They don't have the ability to operate the business the way a business person might when they have their own business on Main Street in your town. Yeah, exactly right. Now, of course, we go beyond that. And this has come into view more recently beyond the avoid category into other aspects of faith-based investing.

Share one of those with us. Sure. Over the years, the expression of one's faith in the marketplace has changed to go past just avoidance the way that I described a moment ago and for investors to try to have a more proactive impact through their investments. Shareholder advocacy, or some people call it corporate engagement, is a practice that goes farther than simple avoidance. It requires the investor to engage with the company in which it invests, either by encouraging the management team or challenging them to run their company more effectively and better. Famously, Christians and other investors are credited with contributing to the end of apartheid in South Africa many years ago. And this was through shareholder engagement with American and European companies that operated in South Africa that were seen as contributing to the oppression and separation in that society. And today, corporate engagement for Christians takes many forms. Most investments, or most engagements, I would say, are effective when there are a coalition of investor groups, there are groups of Christians who support the same idea, and that they work with companies in ways that are aligned with the company management incentives as well.

Yeah, this is really helpful. Well, of course, we'll continue to unpack this around the corner. We're talking today with Chad Horning. Chad is the president of Praxis Mutual Funds. We're celebrating 30 years of faith-based investing at Praxis Mutual Funds and much more just around the corner. Stick around.

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It's available on desktop or mobile. Simply go to faithfi.com and click app to get started. Well, it's great to have you with us today on faith and finance. Joining me today is Chad Horning.

Chad is a good friend. He's also president of Praxis Mutual Funds, and we're talking about an important milestone in faith-based investing. Praxis is celebrating 30 years of faith-based investing, helping believers align their investments, their deployment of capital with their values as Christians. And we talked about kind of a general overview of some of the aspects of faith-based investing, starting with avoiding companies that are misaligned with your Christian values. And then just before the break, Chad was sharing about an aspect of faith-based investing that involves shareholder advocacy or corporate engagement.

Chad, I'd like to go a little deeper there. Obviously, this type of engagement is most effective when the investors' interests are aligned with the incentives of the management team, right? That's correct. If an investor group wants the company to do something that the company management team believes will hinder their profits or their success in the future, it's unlikely to be successful. And so engaging with companies requires investors to try to focus on things that both parties can agree on.

This process can take months and sometimes years, and so it requires patience on the part of investors. Another example of the way that faith-based investing has evolved over the last three decades is that there's more ability for investors to make a targeted impact on communities through the investments that we make. This has allowed faith-based investors to channel a portion of their portfolios into solutions that deliver a specific social environmental benefit, along with the financial returns that we all need.

Some things that we've observed and participated in the past include international microfinance that brings capital to people that can't participate in the formal system, expanding affordable housing, addressing disaster recovery, preparedness for changes in the weather and things like that. Yeah, this is really exciting to see that real change is occurring as a result of shareholder advocacy. Now, Chad, Christians engaged in the marketplace can, of course, be a powerful force for positive impact.

You just described a few of the ways that can happen, but obviously performance is important as well. So let's talk about that side of faith-based investing. How have faith-based investors fared over the years regarding performance?

This is an important question because people invest for the needs of their family, and so we welcome this kind of question. Over time, it's become easier to invest with one's values and not compromise on investment performance. Thirty years ago, when we had our start, there were precious few investment options that afforded Christians the ability to express their faith through their values.

There were a handful of us, but not many. Today, there are many choices for faith-oriented investors. There are dozens of mutual funds, maybe over 100, from several fund families covering many asset classes and different expressions of faith.

And then in the last decade or so, a few firms have launched exchange-traded funds, or ETFs, to meet these same needs in different wrappers. The factors affecting investment performance are broad and varied, and rarely that just one factor helps us to understand the performance of a fund. So it's been our experience, though, at Praxis that when investment strategies are well-designed and executed, that you don't need to compromise performance when you're making a desired positive impact. Yeah, that's really helpful and obviously a concern of a lot of folks as they go into these types of investments. So we've been talking about this rich history that you enjoy there at Praxis. How has that shaped your investing there at Praxis Mutual Funds?

Yeah, a couple of things come to mind. We've sharpened our focus over the years on making a real-world difference for Kingdom investors. We've started primarily with avoidance screens that we talked about at the beginning, but over the years we've expanded to include seven different impact strategies. We call them Impact X.

Maybe we can talk about that some other time. We've also learned that the investment strategies that we use matter. What we do is a method called optimized index investing, which provides the investment success that we think our shareholders need to support their families' needs.

But we also then couple that with these Kingdom impact strategies that I described a moment ago. And then lastly, I think we try to maintain a sense of humility. We understand that the work that God has done and can do through investing is powerful, and we believe that we have much more to learn in participating with God as partners in this work.

Yeah, that's exciting work. All right, let's look forward, Chad. Share with us some of the things you're most excited about. What's on the horizon for faith-based investors in the next 30 years? I've touched on this a little bit, but I would expect our industry to continue to generate products and bring products to the market that will serve a wide range of Christians in the ways that they want to express their faith through their investing.

This has been happening over the last 30 years, and I would expect that to continue. I also expect that there will be a convergence on the focus on factors affecting the financial performance of companies that matter both to Christians and traditional investors. For example, Christians likely care a lot about the people that are affected by companies as well as the company's impact on creation.

Traditional investors care about these same factors because they believe that how they're managed by a company will affect the company's financial performance. And then at the same time, there's likely to be a growth in investment options that serve a wide range of expressions of faith among Christians so that they can invest in the things that they care most about. I expect that there won't just be one expression of Christian values in the investing world. Some people prefer to focus on items of morality, a Christian morality. They'll find investment products that fit them best. Others may want more focus on Christian social justice, and I expect them to have products that will serve them as well. Yeah. And Chad, you mentioned the growth in this space, obviously new investment options coming online all the time, and that's just going to further expand the range of options available to Christians that can dial into their particular area of interest, right? That's correct. While we're competitors, we're also friends with lots of the folks in our industry that are creatively bringing products to the market that serve this wide range of beliefs and faith expressions. Yeah, that's great.

All right. Finally, what encouragement do you have for our listeners as they think about their own portfolios in light of what you shared about faith-based investing? First and foremost is I encourage your listeners to think about this as something that they can do. This is possible, and I would encourage them the next time they meet with their financial advisor to ask their advisor how they can invest with their faith. You don't need to compromise the way that you invest for the benefit of your family. Returns are important, but you can make a kingdom impact on the world along the way. And Chad, speaking of financial advisors, are you seeing more and more advisors that are bringing this faith-based investing approach into their practices?

Of course. Yeah, this has been a real encouragement for us, and I know the other fund families as well, over the last 10 or 15 years, the growth in advisors who are helping their clients integrate their values into their investment portfolios. I think we have the folks at Kingdom Advisors to thank for that, and it's just been growing year over year. Yeah, there's no question. And obviously, if this is something your advisor who might be a believer but not introduce this into his or her practice yet, it's not too late.

They can start up this learning curve along with so many others who are really making a concerted effort to introduce faith-based investing into their practices. Chad, thanks for stopping by today to share the Praxis story. We appreciate it. Thank you again, Rob.

It's been a pleasure. That was Chad Horning of Praxis Mutual Funds. You can find more at praxismutualfunds.com. That's P-R-A-X-I-S mutualfunds.com.

We've got to take a quick break, but much more just around the corner. If you have a question today, call right now, 800-525-7000. By the way, you don't have to call, just send an email, askrobatfaithfi.com. That's askrobatfaith, the letters F-I dot com.

Stick around. We are grateful for support from Praxis Mutual Funds. Praxis Mutual Funds has seven impact strategies that are designed to create positive real-world change. More information is available at praxismutualfunds.com. The fund's investment objectives, risks, charges and expenses are contained in the prospectus and summary prospectus. This and other information is available at praxismutualfunds.com. Investments involve risk. Principal loss is possible.

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800-525-7000 is the number to call. Let's go to Cleveland. Hi, Jim. Go ahead. Hey, how you doing?

I really appreciate your program, and thank you for addressing my question. I'm 65. I'm going to be retiring in a couple of months. And when I looked at my projected monthly check for Social Security, I noticed it didn't notify me of any earnings that have been calculated for 2023. So I didn't know if it would affect the amount that I get if I filed for Social Security before I filed my 2023 taxes.

I see. No, there won't be any bearing there whatsoever. So 2023 is essentially closed as far as income is concerned, and so taking Social Security now won't affect that. And if you're entitled to any increases, those will come when you have the ability or when that gets added, regardless of when you take it. The only thing that waiting would affect is every month you essentially get one twelfth of eight percent by delaying taking Social Security in an automatic increase up to age 70. And so obviously taking your benefit check or starting to receive benefits is going to freeze those increases.

But anything that would come by way of you replacing one of your high 35 years through earnings in a more recent year or a COLA adjustment, cost of living adjustment, those are going to happen automatically regardless of when you take the benefit. I see. Okay, perfect.

Well, that answers my question. I deeply appreciate it. Thank you so much. Absolutely, Jim. Thanks for your call today. Let's go to Indianapolis. Hi, Nick. Go ahead, sir. Hey, Rob. Thanks for taking the call.

Yeah, just had a quick question. My wife just inherited some money from the passing of my father, and we're doing pretty well. We were able to make payments on our home currently, pay the bills, so the extra monies. We're just kind of wanting to see what your advice would be to maybe invest it or anything to help grow the money or put it in a safe spot to see your return on it.

Absolutely, Nick. Do you mind me asking how much you received? It was around $40,000. All right, very good. And just to confirm what I'm hearing, you have your emergency fund, you don't have any consumer debt, and you feel like you're on track with your long-term retirement savings? Yeah, we got a Roth, a 529. We got two beautiful daughters that we're starting a college plan for. Cool.

Yeah, we got an emergency. Yeah, all right. And anything else besides the Roth IRAs in terms of retirement? Do you have 401Ks at work or anything like that? No, no 401Ks. I have a Roth, and then my wife has a Roth, so we got the two accounts there.

Yeah, all right. We put in two monthly. Okay, and are you self-employed or are you a W-2 employee?

W-2, both of us. And is there a 401K option even though you're not putting anything in it or your companies just don't offer 401Ks? They do offer, but they don't match, so we kind of met with our financial advisor and he recommended, since they don't match, Roth was a better option for kind of our situation.

Yeah, I agree with that. I think the challenge with the Roth is you just get to that contribution limit pretty quickly. So this year, the Roth IRA contribution limit has gone up a little bit, but it's still only $7,000 per person if you're under age 50 and 14 between you and your wife. But given that really you probably need to be putting away 10% to 15% of your income, most folks will find that they need to be able to put away a little bit more than $7,000 a year in order to reach their retirement goal. So if you've done some planning and you believe that that's enough, that's great. If you want to be able to put more away, that's where even a non-matched 401K can be great. The key is just to make sure you're on track for what you ultimately need to save.

And if you've started early enough, you may be perfectly fine doing just the $14,000 this year for the Roth IRA. Beyond that, if you feel like you're on track to do what you need to do there, then obviously other options would be, number one, do you have a mortgage on your current property? Yes, we still have a mortgage.

We actually moved over the summer. So you have a new 30-year mortgage that you just started? Correct.

Alright. And what's the interest rate on that since you moved pretty recently? It's around 6%.

Yeah, okay. So I mean that's a guaranteed 6% return on your money, anything you put toward the house. So that's one option is you could accelerate that payoff. Number two is if you don't have a full six months expenses in your emergency fund, you could shore that up.

Three would be I would look at just any giving desires that the Lord has placed on the heart of you and or your wife or together as a couple. And then four would just be to say let's look at other long-term savings opportunities. So perhaps if you, by fully funding your Roth, it doesn't give you the ability because you need the rest of your income that you have coming in.

One option would be go ahead and start contributing to the 401k and then just replace that money that you were counting on because now your check is going to be lower coming from your employer. Replace that with money coming out of the $40,000 which in a sense moves it from one bucket to the other. So by spending it down in relationship to how much you're now putting in your 401k which you weren't previously, you're systematically moving that into a tax deferred environment. But that's going to come down to ultimately your retirement planning with your advisor that will help you determine whether you're on track ahead or behind with your retirement savings through the Roth. If you're on track, I'm not necessarily asking you to save more than you need to. It's not about just accumulate as much as you can. It's really more about creating a plan, praying over it, and then following through on that plan.

Does all that make sense though? Yeah, that's helpful and we do hope to give some to the church and wherever Art leads us and I appreciate that feedback and advice. Okay, good. Yeah, and I think it would be one thing if you had that 2 or 3% mortgage given that that's up around 6.

You know, the amount you're going to save over a 30 year mortgage by prepaying a portion of it now, I mean there's a lot of savings there that you will ultimately cut down on by sending an extra principal reduction payment. Now, God bless you, Nick. Thanks for your call today.

Well, that does it for us today. I'm Rob West. Thanks to our amazing production team and to you for listening. I hope you'll join us again next time right here on Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.