Home / News & Publications / Michigan Catholic News / 2008 / Crisis prompts reassessment of portfolios; need for scrutiny
Crisis prompts reassessment of portfolios; need for scrutiny
by Robert Delaney of The Michigan Catholic
Published November 14, 2008
Scriptural advice on work, thrift
Sound advice about work and thrift and stewardship of one's resources can be found in the Bible, especially in the Old Testament books of Proverbs, Ecclesiates and Sirach. Here is a sampling:
"Honor the Lord with your wealth, with first fruits of all your produce; Then will your barns be filled with grain, with new wine your vats will overflow." Proverbs 3:9-10
"The just man's recompense leads to life, the gains of the wicked, to sin." Proverbs 10:16
"The honesty of the upright guides them; the faithless are ruined by their duplicity. Wealth is useless on the day of wrath, but virtue saves from death." Proverbs 11:3-5
The good man leaves an inheritance to his children's children, but the wealth of the sinner is stored up for the just." Proverbs 13:22
"Better a little with fear of the Lord than a great fortune with anxiety." Proverbs 15:16
Better a poor man who walks in his integrity than he who is crooked in his ways and rich." Proverbs 19:1
"He who has compassion on the poor lends to the Lord, and he will repay him for his good deed." Proverbs 19:17
"From a man's greed comes his shame; rather be a poor man than a liar." Proverbs 19:22
What advantage has the worker from his toil? I have considered the task which God has appointed for men to be busied about. He has made everything appropriate to its time, and has put the timeless into their hearts, without men's ever discovering, from beginning to end, the work which God has done. I recognized that there is nothing better than to be glad and to do well during life. For every man, moreover, to eat and drink and enjoy the fruit of all his labor is a gift of God." Ecclesiastes 3:9-13
"My son, rob not the poor man of his livelihood; force not the eyes of the needy to turn away. A hungry man grieve not, a needy man anger not; Do not exasperate the downtrodden; delay not to give to the needy. A beggar in distress do not reject; avert not your face from the poor. From the needy turn not your eyes, give no man reason to curse you; For if in the bitterness of his soul he curse you, his Creator will hear his prayer." Sirach 4:1-6
Research by Edna M. Delaney | Detroit Sure, most investments are down, but that just means it is time to reassess investment portfolios, not give up on securities altogether, say some Catholic investment and estate planning experts.
Despite volatility in securities markets for some time, most market watchers "didn't see this coming," says Joseph Weglarz, director of the University of Detroit Mercy's undergraduate programs in economics at Macomb University Center in Clinton Township.
Although he acknowledges portfolio losses pose real difficulties for those approaching retirement, who must soon begin to cash in securities for living expenses, he advises those who have the time to wait at least four to six years to stay in the market to a great extent.
"For a person who doesn't absolutely need the money, to sell in this market is sheer folly, in my view," says Weglarz, who worked for more than 10 years for Wall Street stock brokerage firms. (He also worked briefly as a reporter for The Michigan Catholic in the early 1990s.)
While those who have a short time horizon when it comes to needing the funds should be shifting into certificates of deposit and near-cash investments such as money market mutual funds, he says people who have longer time horizons should be looking at mutual funds that take a value-investing approach or directly buying stocks they consider undervalued.
"If they're 100-percent invested in stocks, maybe they should change that to 70/30 or 60/40 ratio of stocks to cash," he says.
And if they already own stocks they believe to be undervalued, they should consider building up their holdings, following the dollar-cost averaging approach of continuing to buy shares when the price drops, Weglarz says. "Over the long haul, markets have vindicated those investors who put money into the market both in good times and in bad times," he says.
But does that advice hold good even for those with stock in troubled Detroit automakers General Motors and Ford? "Yes. I believe both the incoming administration (in Washington) and the outgoing administration are going to do all that they can to see these companies survive. I don't see them going away. I hold Ford shares myself, and watched them plummet, but I'm holding onto them," he says.
Weglarz points out that, despite the financial turmoil, many companies have been reporting "pretty good" earnings reports. And he also notes that many people in other countries have been fleeing to the U.S. dollar and dollar-denominated investments. "We still are the most powerful country in the world. We still have extremely powerful markets," he adds. Investors should consider companies whose products are purchased in good times and bad, such as cereal-maker Kellogg's and personal care products-maker Procter & Gamble, Weglarz recommends. Also, companies with good records of paying dividends should be considered, he advises.
Weglarz, a member of St. Paul on the Lake Parish in Grosse Pointe Farms, says he cannot say his faith directly affects his investment decisions, but he believes the theological virtues of faith, hope and charity do provide a constant view of life.
"There's an understanding of the importance of high ethical standards and a belief in always doing the right thing. And there's also a moderating aspect that cautions you about going overboard on something," he says. "If you get too greedy, the markets are going to humble you," he cautions.
George P. Schwartz, of Schwartz Investment Counsel in Bloomfield Hills, says the financial crisis does not change the basic principle that people should be making investments consistent with their investment objectives, but it does change how they should allocate the assets in their portfolios.
"In my view, investors, generally speaking, should shift their asset allocation toward short-maturity bonds and cash (money market mutual funds) for protection of principal," says Schwartz, a member of Our Lady of Good Counsel Parish in Plymouth.
Expected changes in tax and labor policies under the new administration would likely put a squeeze on corporate profits and productivity, and "price-to earnings ratios won't expand like they otherwise would, resulting in lower returns than would otherwise be the case," he continues.
Schwartz manages the six Ave Maria mutual funds, each of which has a different investment objective, but all of which rigorously steer clear of companies that in any way support abortion or pornography, or that offer non-married partner benefits.
How does that work out in terms of performance? "Extraordinarily well," he says, noting that three of the Ave Maria funds the Rising Dividend, Growth and Bond funds have earned a five-star rating from the Morningside rating service. Besides avoiding investments that would place the investor in the position of cooperating with evil, Schwartz also cites the importance of ethical behavior in all of a person's business dealings.
James Lampertius, an estate planning attorney and principal of Lampertius & Associates PLC in Farmington Hills, says the market turmoil that has accompanied the financial crisis raises questions for those who are acting as trustees of funds on which children or adults who cannot make their own decisions depend.
The collapse of some prominent financial institutions underscores the need for scrutiny and for diversification, he says. "There is no substitute for personally understanding the background and reasons for the allocation of the assets," says Lampertius, a member of St. Owen Parish in Bloomfield Hills.
But simply converting an entire trust account into cash is not an option, he explains, because trustees have a duty to conserve the capital, and so something must be done to seek reasonable growth to offset cost-of-living increases.
On the link between faith and good business practices, Lampertius says the same type of integrity and honest reflection a person employs in his or her faith life should be brought to bear in analyzing a client's needs. "You have a duty to look out for the well-being of those who are dependent on you," he adds.
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