Church investments have become an important way for religious organizations to generate income for their operations and community programs. However, choosing suitable investments that align with the church’s values while also providing adequate returns can be challenging. This article provides key information on evaluating church investment performance, assessing investment risks, and conducting proper due diligence on investment options based on real-world church investment reviews.
Look at total return to evaluate church investment performance
When evaluating potential church investments like stocks, bonds, real estate funds, it is important to look at total return rather than solely focus on dividend yield. Total return includes both capital appreciation and dividend/interest income. For example, a stock with 2% dividend yield but 10% annualized total return is likely a better investment than a stock with 4% dividend yield but only 6% total return. Calculators that factor in reinvested dividends can help provide total return estimates. Review historical performance across full market cycles rather than just the past 1-2 years.
Assess risk factors of various church investment types
Different investment assets have different risk profiles that churches should understand. Publicly traded stocks and equity funds present higher volatility and potential for capital loss than investment-grade bonds and bond funds. Alternative investments like private equity and hedge funds often have liquidity risk in addition to volatility risk. Real estate investments dependent on property values and rents have risks tied to local market conditions. It is important to build a diversified church investment portfolio across asset classes, geographies, etc rather than concentrate risk.
Review church investment manager selection process
Rather than directly managing investments themselves, many churches hire professional investment management firms. It is important to review the manager selection process, look at the firm’s experience with religious organization clients, fee structure, custodial services, transparency and reporting processes. Background checks on key personnel and investment approach philosophy should be conducted. Look for investment policy statement alignment.
Ensure proper monitoring and oversight
Ongoing monitoring, oversight and rebalancing of the investment portfolio is key. Investment/finance committees should have regular meetings for reviews and to evaluate performance versus approved targets and risk metrics. Watch for style drift or any deviations from the investment policy statement. Formal manager reviews every 3-5 years can assess continued fit.
Thorough evaluations of church investment performance, risks, investment managers and oversight processes are crucial to alignment with the church’s financial goals and values. Review historical returns across full market cycles, understand asset class risk factors, vet investment managers carefully and maintain continuous monitoring.