Is Your Plan Working? March 11, 2011
Posted by royceruckman in Investments.add a comment
Do you have an investment plan? If so, is your plan working?
There is an old saying, “if you don’t know where you are going, any road will get you there.” Unfortunately, some churches don’t know where they are going with their investments and they don’t like where they have arrived. Over the years I have consulted with many churches helping them develop a plan for their investments. Some have even developed a written investment plan, others just agreed on how to invest their assets.
In my many years of investment consulting with U.M. churches, I have seen several types of situations that have had very bad results. Some of the more common problem situations are described below:
- Some churches have developed a plan for their investments but did not stick with the plan. They were invested properly for their circumstances but after experiencing a loss year decided to move their assets into low risk investments such as money market funds, CD’s, etc. The result has been that they suffered a loss in the down year(s) but pulled out of the market before experiencing the market recovery years. This is painful. They suffered losses but missed the gains in the recovery years. A rule for investing is to buy low and sell high. The churches just described did the opposite, they bought high and sold low. This is a sure recipe to lose money.
- Some churches have no investment plan. Or rather, their plan is to “not lose money,” of course that is not really a plan. These churches tend to invest their assets in an attempt to avoid any loss of principal and ignore inflation losses and their loss of potential earnings. I have seen churches investing long-term assets such as endowment funds in money markets, savings or CD’s. The committee desires to avoid all market volatility loss but ignores inflation losses and the additional income that could have been earned with a more balanced portfolio. Earnings on short term interest bearing accounts will often not even cover inflation, many are only earning 1% to 2%. In a good balanced style portfolio, designed for moderate or long-term investors, they could be earning 8% to 10% or perhaps even more. For moderate to long-term investors, it is critical to invest for long term performance and be much less concerned with short-term market volatility.
- Some churches change their investments whenever new people come onto the committee. This is a sure road to disaster. If your investments are in a continual state of change because of the views of committee members, you have no plan and are almost guaranteed to lose money.
If you see your church in one of the scenarios described above, you definitely need investment guidance. We can help you develop a plan to maximize your investment returns and minimize your risk of loss.
The goal of investing-
- Is NOT to simply maximize earnings performance, and
- Is NOT to simply avoid loss through market volatility.
- The goal of investing is to maximize performance while managing (or controlling) all forms of risk.
Need Help?
If your church would like assistance in developing an investment strategy, reviewing your current investments, or exploring other investment options, we would be happy consult with your decision makers to assist. Our Foundation provides these services free of charge to United Methodist churches throughout Indiana. Just call me or send me an e mail.
Happy Investing!
Royce
Royce L. Ruckman, CPA, AEP
Director of Investment Services
United Methodist Foundation of Indiana, Inc.
8401 Fishers Center Drive, Fishers, IN 468038
toll free 877-391-8811, cell 765-661-6804
e mail rruckman@niumf.org
Visit our web site at http://www.niumf.org
Recent Non-profit Survey March 11, 2011
Posted by royceruckman in Investments.add a comment
A recent survey of non-profit investors reflects some interesting concerns. The biggest investment concern for non-profit financial executive poll participants during the coming year is to make asset allocation changes focused on downside risk protection. Over 80% of poll participants view downside risk protection as a priority for the coming year. Seventy-five percent of that group view this as a “high” or “extremely high” priority.
Forty percent of the poll participants indicated their organization is open to using outside investment service providers in their quest to reduce downside investment risk. More and more charities are looking to outsource many of the responsibilities related to investment management. This helps reduce time commitments and allows for greater focus on return enhancement and risk protection.
Some other key investment priorities mentioned by the survey respondents included:
- Best ways to make asset allocation decisions
- Ways to increase performance and reduce volatility risk by adding asset classes to the portfolio
- Ways to increase donor confidence in the organization’s investment policies
United Methodist churches throughout Indiana have access to a unique resource to assist in all the above mentioned concerns. The United Methodist Foundation of Indiana, Inc. offers a variety of investment resources to all local churches and church related organizations. Some of those resources include the following:
- We consult with churches to identify a proper allocation of assets to different asset types or styles
- We offer a sample investment policy and can help you develop a policy for your circumstances
- We consult with your decision makers on a variety of investment and stewardship related matters
- We offer 11 different investment pools in which IN U.M. church can invest. One of those investment pools was chosen specifically because of its long history of minimizing losses in down markets while producing outstanding long-term returns.
Need Help?
If your church would like assistance in developing an investment strategy, reviewing your current investments, or exploring other investment options, we would be happy consult with your decision makers to assist. Our Foundation provides these services free of charge to United Methodist churches throughout Indiana. Just call me or send me an e mail.
Happy Investing!
Royce
Royce L. Ruckman, CPA, AEP
Director of Investment Services
United Methodist Foundation of Indiana, Inc.
8401 Fishers Center Drive, Fishers, IN 468038
toll free 877-391-8811, cell 765-661-6804
e mail rruckman@niumf.org
Visit our web site at http://www.niumf.org
