Many years ago I listened to recordings of a very wise and insightful man named Earl Nightingale.
Earl was old when I was young. I would listen to his gravelly baritone voice spout wisdom every morning on the local radio station, and he so inspired me I bought sets of his tapes to listen to in my car while driving across the big empty that is Wyoming. (Yes, tapes. I told you it was a long time ago.)
Those tapes held wisdom beyond the ages. In one of them, Earl told his listener that he could have whatever he wanted if he would only put his mind to achieving it. Given his wisdom, his age and his matter-of-fact speech, listening to Earl was like listening to my grandfather.
He always encouraged his listeners to think big. A new refrigerator, a new car, whatever it was you were wanting, if you could conceive it and believe it, you could achieve it.
Our minds, however, want us to keep things reasonable. We know that our resources are limited and scarce, and we take that scarcity into account when we do our planning.
St. Augustine had something to say about this very mindset. In his Tractates on the First Letter of John, the good Doctor of the Church tells us that “The entire life of a good Christian is in fact an exercise of holy desire. You do not yet see what you long for, but the very act of desiring prepares you, so that when he comes you may see and be utterly satisfied.”
He goes on to say that God increases our desire for him “which in turn enlarges the capacity of our soul, making it able to receive what is about to be given to us.”
God’s love and mercy is abundant, beyond our imagination. He is preparing us to receive the greatest gift, His love, by increasing our capacity to receive it.
In St. Augustine’s letter to his friend Proba, he discusses something similar with respect to prayer. He said:
“Why he should ask us to pray, when he knows what we need before we ask him, may perplex us if we do not realize that our Lord and God does not want to know what we want (for he cannot fail to know it) but wants us rather to exercise our desire through our prayers, so that we may be able to receive what he is preparing to give us. His gift is very great indeed, but our capacity is too small and limited to receive it. That is why we are told: Enlarge your desires, do not bear the yoke with unbelievers.”
The crux of stewardship is the realization that all that we have and all that we are comes from God. Here we have St. Augustine telling us that God wants to give us more by enlarging our soul and increasing our desire to receive what he wants us to have. He also tells us that when we pray, we aren’t entering into some bargaining session with him as he already knows what we need, and he is preparing our hearts to receive a far greater gift that we could ever imagine.
Finally, in a word of caution, he tells us that “…this exercise will be effective only to the extent that we free ourselves from desires leading to infatuation with this world.”
When we let go of our worldly desires and attachments, we increase our desire for God and open our hearts to the abundance he wants us to have, which is greater than anything we could imagine.
Thanks for reading. Please leave a comment if you would like. I always read them and respond.
In past columns I have mentioned the St. Stephens Indian Mission in St. Stephens, Wyoming. The mission is a diocesan parish and is on the Wind River Indian Reservation. St. Stephens has been the Catholic presence on the reservation since the Jesuits established it in 1884.
St. Stephens is the primary Catholic church on the reservation. Inside the church is replete with images and designs of Arapaho culture intertwined with Catholic symbols and structures. “Beautiful” is a word that falls far short in describing the church. It is not beautiful like the cathedrals in Europe, but evinces the deep spirituality of a people who have completely embraced Catholicism without abandoning their unique culture.
One of the most striking examples of cultural blending is the Stations of the Cross that adorn the walls on both sides of the church. The paintings were created by a local Arapaho artist and, like much of the artwork, combine both Indian and Anglo cultures.
I was given a booklet by the pastor of St. Stephens that gives some details about the symbolism in the paintings. It says:
“… Jesus is depicted with the spirit of a white eagle hovering protectively close to his body instead of the traditional halo. The eagle, respected for its size, strength and keen movement in flight, is an integral part of Indian culture. The dove, suspended over Veronica and Mary represents love, peace and tenderness. This blending of symbols will help us visualize and accept the fact that Jesus’ way to death is our way to life.”
The picture that accompanies this column is the 14th station, titled “Jesus is Laid to Rest.” Here Jesus’ body is covered and placed upon a scaffold, a traditional Arapaho practice. In the front are the grieving women. It was the image of the woman in the middle who is cutting her hair that brings me to tears nearly every time I see this station.
Hair is a powerful symbol in the culture of many tribes. Because it is so important, hair is generally left uncut.
Except in grief.
Even today at the funeral of Arapaho tribal members, family will show up with their hair cut off in mourning for the loved one who died. It is a serious action fraught with deep, sorrowful meaning.
The woman in the painting has cut off one braid, which is lying on the ground, and is in the process of cutting off her second braid, wailing in agony over the death of her loved one, Jesus. The images of the other two women, even from the back, leave no doubt about the grief they are feeling as well.
I have seen many, many beautiful statues and reliefs portraying the Stations of the Cross. I have visited two life-sized Stations in San Luis, Colorado; St. John, Indiana. They are truly stunning and worth the trip to see them and to pray at them.
But it is the Arapaho woman cutting her hair that, for me, makes the grief almost unbearably real. My friend, whom I loved so much, is dead.
But in three days’ time ….
If you would like to see all 14 Stations of the Cross and their accompanying prayers, visit https://bit.ly/3sZw4c6
As always, thanks for reading. I would love to hear from you. Write to me at mpotter@evdio.org.
Last time we got together I hinted at a discussion about Behavioral Finance, an area primarily devoted to investor behavior. Today, however, I want to look at it in light of stewardship.
Behavioral Finance postulates that people make irrational money decisions because it hurts more to lose than it feels good to win. In the area of stewardship, this emotional response drives us to avoid sharing our gifts of treasure in some instances or to be less generous with than we might picture ourselves as being in others. We define losing as being involved in a less than successful venture and we will do all we can to avoid that situation because losing hurts.
Let’s say that you are in a discussion with Max from your parish. Max is talking to you about a project that helps teens remain faithfully Catholic after they get out of high school. A faithful, prayerful man, Max is known to focus more on his worldly knowledge than prayerful discernment. But he is convinced that the project will be successful and shows you his plans, materials and budget. Knowing that Max gets most things right, you become interested in helping out. While you have interest in the project, the fact that Max seems poised for success means that it is likely that your support will allow you to experience success as well. Max needs an additional $2,000 to get the project up and running and asks you to contribute that amount. You believe that your odds of winning far exceed your odds of losing and you tell Max you are in.
Now let’s say you are having a conversation with Father Mike. Father Mike is a great guy, a wonderful pastor, and the Holy Spirit is alive in everything he does. He mentions that he has an idea how to keep Catholic teens engaged in their faith after they graduate from high school. He has a general idea of how he wants to get this done, but admittedly doesn’t have a detailed – or any – real plan. But he knows he is to proceed with the project because the idea came to him during prayer, and he has prayed about it for weeks. He keeps coming to the same conclusion – trust in the Holy Spirit to guide him, and he will succeed. You ask him how much he needs to get things rolling and he says “I’m not sure. Maybe $2,000, but it’s just a guess.” Father Mike has not made up a budget for the project, does not have a timeline, and has no training in finance or project management. You tell him “Good luck, Father. I hope this works out for you.”
Why did you commit to Max but wash your hands of Father Mike? Because you came to the conclusion that Max has a far better chance of success than Father Mike. You are comforted by budgets, timelines, meetings, agendas and reports. Max has those and Father Mike does not. You don’t want to be part of a project that you don’t think will succeed because it hurts more to lose than it feels good to win.
But Father Mike has faith emanating from prayer and discernment. He has cast his trust upon the Holy Spirit to bring the teens of his parish closer to Christ. He is a great believer in the axiom “God will provide” and he knows things will work out well.
Behavioral Finance tells us that we are far more likely to help out Max than we are Father Mike, but our faith tells us to abandon the spreadsheets and listen to the answers that come from prayer. Just imagine if the Apostles had made their decision to follow Jesus based on the likelihood of success.
As stewards, we are committed to caring for the gifts with which God has graced us. We are reassured by spreadsheets and audit reports, which are necessary and expected, yet we are called to a greater faith in doing God’s work, where prayer and discernment are far more important than an income statement. Those are the times we respond to an improbable, illogical call that looks like it doomed from the beginning by saying “Sure. I’ll help.”
As always, thanks for reading. I would love to hear from you. Write to me at mpotter@evdio.org.
My last two posts were titled respectively “Time” and “Talent.” Today we work on the third T, the third leg of the stewardship stool, treasure.
I saved treasure for last because I didn’t want to upset the natural order of things. I could have chosen to present them in reverse order – treasure, talent, time – but that just feels so wrong when I think it or say it. But I also saved “treasure” for last because it is the most emotionally charged of the three Ts and is certainly the most complicated of the three. A good friend of mine once told me that complex questions require complex answers, and, while not a question. “treasure” is nonetheless a complex item and requires a more complex analysis.
That means that we won’t finish it today. Over the course of this column and the next two, look for more food for thought on this subject. Even then, we will only scratch the surface of treasure with respect to its place within stewardship.
First, let’s not use euphemisms where truth is clear. When we refer to “treasure” here, we are talking about money. And, lest you think you are being duped into someone – yours truly – setting you up for an “ask” at the end of this, don’t worry. That is not going to happen.
I have spent most of my working life dealing with money. Not just earning wages for producing something, but being in the middle of the exchange of money. In the investment business, I advised my clients to take their money and invest it to meet their needs. In my work of stewardship and development in the Church, I match the works of the Church with the people of God. Being in the middle of these relationships for more than three decades has given me a unique perspective on money, seeing how it affects people as they earn it, save it, spend it, and give it away.
I have worked with people who were wealthy and viewed money not just as a means to accumulate more worldly goods but as a method of keeping score. They would measure themselves against their peers, basing their value as human beings in terms of their net worth measured against the other members of their group. If they bought another house, another car, or another business, it was never because they needed it for sustenance. It was about how much they have compared to others.
The problem with that, gaining a sense of superiority over others based on possessions and account balances, is that, unless you are Jeff Bezos, there is always going to be somebody richer than you. That is one of the factors that drives people to work harder to accumulate more so they can keep up, but not take so many chances that they would lose what they already have.
That’s the first item to really understand about money and our relationship with it, i.e. it has an emotional chokehold on us of which is extraordinarily powerful. We find that our emotions can drive us to do things to make money that, if we were looking at it from an outside and objective viewpoint, we would never consider doing. Not dishonest things, but working longer hours, sacrificing time with family, compromising our health, and causing distractions in our lives that affect our relationships with God and those closest to us. We are willing to engage in those harmful and illogical behaviors because we believe the trade-off of greater wealth is worth the price.
Next up – Treasure, part II
This statue is of St. Matthew from St. John Lateran Basilica in Rome. Note that he is standing on a bag of money, as he was a tax collector and a wealthy man before Jesus chose him to be an Apostle.
A few weeks ago in this space, we shared some ideas with you about the stewardship concept of time. Today we will look into talent.
I have a Caravaggio (1571-1610) print hanging in my office. Not the original of course, but a digital reproduction on foam board, complete with a wrinkled corner from falling off the wall and striking the floor. It’s “The Calling of St. Matthew and depicts Jesus and Peter visiting Matthew, calling him to follow Jesus.
I was first turned on to this painting by a friend of mine, Father Jim Heiser, pastor at St. Stephens Indian Mission on the Wind River Reservation in Wyoming. Years ago, he asked me if I was familiar with Caravaggio and this piece. When I answered in the negative, he sent me a text with a copy of the painting.
For more than a decade, I have included in my email the verse from Matthew’s Gospel that describes how the apostle came to be called by Jesus in spite of his sinful past as a tax collector. “As Jesus passed on from there, he saw a man named Matthew sitting at the customs post. He said to him ‘Follow me.’ And he got up and followed him.” (Mt 9:9) The Caravaggio painting depicts this moment, although the characters in the painting are dressed in garb of Renaissance Italian men, not first century Jews.
Notice that there wasn’t any hesitation in Matthew’s response to the call. Rather, he just got up from his place of comfort and followed Jesus.
In 2010, I heard the Lord call me to leave my business and go to work for the Church in Cheyenne. After an awful lot of prayer and discernment, I did just that.
I assumed I would spend the rest of my working days serving the Church in Wyoming, where I had lived for 35 years, raised a family and built a business. But God didn’t place any parameters regarding the place and time for that work around his call and my assumption was wrong.
Nine years later I was called to leave Cheyenne and come here. So following a great deal of prayer and discernment, we packed up everything we owned and moved away from all we had known to serve the Lord in the Diocese of Evansville.
The last two years have been far from what I thought they might be like. Not better or worse, but different. Uncomfortable at times, being in a new place, meeting new people, then getting hit with all that the pandemic brought. But I take heart in the words of Emeritus Pope Benedict XVI when he said: “The ways of the Lord are not easy, but we were not created for an easy life, but for great things, for goodness…. Those who desire comforts have dialed the wrong number. Rather, he shows us the way to great things, the good, towards an authentic human life.”
My wife and I asked God what he wanted from us. We listened and said OK, Lord, we are yours and will do what you want. We trust you.
I encourage you, dear Reader, to ask God what he wants from you and what you can give to the Church, because the Church needs you. You have talents that can help grow the Kingdom of God, even if you don’t realize it right now. Open your hearts to those opportunities that do appear. Trust the Lord and say yes.
Every time I look at that Caravaggio print and see Jesus’ pointing at Matthew, I see him pointing at me. In reality, he is pointing at all of us because that’s what he wants – all of us.
St. Stephens Mission on the Wind River Indian Reservation, St. Stephens, Wyoming
Sunday is Palm Sunday, one of the two times during the year in which we hear the reading of the Passion of our lord Jesus Christ. The other, of course, being Good Friday. It is likely there will be several readers taking on various roles as they present the Passion to those gathered. The Passion, even in its grief and sorrow, is filled with hope as it leads to the Resurrection and the joy of our Easter greeting, “Jesus is risen, he is truly risen!”
I have been a reader at my parishes for many years. It is both a great blessing and enormous responsibility to proclaim Scripture to my brother and sister parishioners. Over the years I have read at Mass during every liturgical season, from Ordinary Time, Advent and Lent, to the great feasts of Easter and Christmas.
Several times I was scheduled to be a part of the reading of the Passion. We are familiar with the scenario as the presiding priest takes on the role of Jesus, a second reader is the voice of multiple characters, and another reader acts as the narrator. Finally, the voice of the crowd is supplied by the congregation.
One particular Palm Sunday I was assigned the part of the narrator. As I was giving voice to the actions of the characters in the Passion, I became increasingly agitated at the terrible things that were happening to Jesus: the Apostles falling asleep while He prayed; His betrayal by Judas; Peter’s denials; the crowning of thorns and the mocking of the crowd. As familiar as I was with the whole production, having witnessed or been part of it since my childhood, this time, as narrator, it got to me.
At one point during the Passion, Pilate poses questions to Jesus but does not get the answers he wants. He then turns to the crowd and asks “What do you want me to do with him?” We all know the answer to that question, so it was not a surprise to me when, reading my lines following Pilate’s question, I read aloud “And they answered Pilate, saying….” The crowd then responds “Crucify Him!”
I knew what they were going to say, as it was right in front of me in the script. But the response “Crucify him” shocked me. When those words came into the sanctuary, where I was standing, from all those people in the church, I remember feeling terrible fear and revulsion in their response.
When Pilate asked his question a second time and received the same response, I felt crushed, as though I was completely powerless and there was nothing that could be done to change the monstrous course of action.
As I continued reading my lines, the tale of Jesus carrying His cross, the nailing of His limbs to the cross and the cruelty of the Roman soldiers overwhelmed me and I was grievously sad. After the priest read Jesus’ last words – “Eloi, Eloi, lema sabachthani – My God, my God, why have you forsaken me?” –I turned to my script and read “Jesus gave a loud cry and breathed his last.” It was all I could do to get those words out of my mouth as I was overcome with grief.
We all knelt down at this point. There I was, kneeling in the sanctuary of the church, tears flowing down my face over the death of Jesus.
Reading at Mass is part of my Catholic stewardship and it is usually an enjoyable experience. But stewardship isn’t always sunshine and roses. That Palm Sunday, I had to recount the cruel torture and death of my friend to hundreds of people sitting in front of me. That was unbelievably difficult.
This Palm Sunday, as you listen to the Passion of our Lord, try putting yourself in the story witnessing your friend Jesus being tortured and killed. Then, in the depths of your sorrow, remember that soon, so very soon, we will once again proclaim that He is risen, he is truly risen.
Many years ago while I was working for the Diocese of Cheyenne, I brought my camera with me to an event at a parish. The bishop saw the camera in my hands and said “Matt, take some pictures.” So I did. What started out as a request for some snapshots to use on his blog turned into a full-fledged part of my ministry, where I use my photos in much of my work, as well as a most enjoyable and challenging hobby.
Obsession might be the better word here, because that occasion tripped a creative lever inside of me that had never been tripped before. Prior to coming to work for the Church, my business required that I pour over spreadsheets and investment analysts’ reports, which were not really right-brain activities. Seeing the possibilities of expressing creativity through photography, I dove headfirst into the picture-taking pool. Since that time of the bishop’s request, I have taken tens of thousands of photos.
Most of those photos have been deleted, however, because they were awful. Out-of-focus, poorly composed, over-exposed – I believe I committed almost every photography sin.
One cannot become a better photographer by just taking more photos, as that approach just equals more junk. To become a better photographer, one must take a critical look at ones photos with the intention of learning from those mistakes. In my desire to get better, I learned that it helps to look at the masters of painting to see how they use light in their work. Since photography is all about light, I thought that was a great idea.
In 2018, the Denver Art Museum had a show featuring sketches and paintings by Rembrandt, a true master of light in painting. We lived close to Denver at the time and made the trip to see the show with some friends. I took my camera with me so I could make a record of Rembrandt’s work for my study.
I took a photo of every piece in the exhibit. I went home that night and downloaded everything to my computer, ready to make a detailed study of all that I had seen.
But I got distracted and they sat on my hard drive for 3+ years, never seeing the light of day.
Recently, two friends, independent of each other and just a day apart, brought up Rembrandt’s painting of The Prodigal Son. I was reminded of the photos I took and looked at them again in detail.
Rembrandt’s use of light brings depth to the sketches and paintings. The sketch shown nearby, Christ Crucified between the Two Thieves, uses light to emphasize Jesus and, peripherally, the two thieves, while clouding the others in shadows and darkness. It feels as though we are a part of the scene, not just viewing a flat sketch.
We are approaching the fourth week of Lent, a benchmark that may find us wondering how we fell so short of fulfilling our intentions of faithfully preparing for Easter and how we can get back on track. This is a question I ask of myself, and this sketch brings me hope that I can salvage my commitments.
Darkness is the absence of light. Rembrandt casts light from above upon the crucifixion, the cruel torture and death of the Son of God. Without the light, there is darkness and no hope. But the light, even in the darkest moments, gives us hope that this is not the end of the story, but the beginning. Thanks for reading. If you would like to see the photos of Rembrandt’s works, write to me at mpotter@evdio.org and I will send you the link.
Lent is a time of preparation which can lead to a heightened awareness of the presence of God in our lives, a presence that can go unnoticed when we have our faces buried in our work or our phones. When we turn away from those distractions, we have a real opportunity to see God in our everyday. Sometimes those moments are moving and powerful beyond description. That’s what I call a God moment.
A God moment can be a moment, an hour, or an hour that seems like a moment. Regardless, it is a very personal, deeply spiritual, and quintessentially moving experience. Mine has stayed with me for more than 40 years.
From the beginning:
I learned to play the guitar in high school. I fell in love with the instrument and played every chance I had, often falling asleep at night with my guitar in my hands.
After graduation, I continued my schooling at the University of Wisconsin-Platteville. I attended Mass at the Newman Center – St. Augustine University Parish. The year was 1976, and the church was new and lacked a lot of church identifiers, like kneelers (there were folding chairs), stained glass, or a permanent altar. Think of a parish hall with commercial carpeting, and an altar brought in for Mass.
There was no organ, either. Music was provided by a dozen students with guitars and voices singing and playing with great spirit and enthusiasm. The first time I saw them I knew I wanted to be a part of that group, with the connection being my guitar. Following Mass, I walked up to the leader (she was a staff member) and told her I would like to join and I was in. It was as good as it gets, playing an instrument I loved in a place I loved with people whom I grew to love.
Our group made a Lenten retreat near the very cold and snowy Spring Green, Wisconsin. This was no five star resort, and our weekend stay was a BYOB weekend – Bring Your Own (sleeping) Bag. Floor space was abundant, as there were no beds. Or rooms, for that matter. Just a big, open space that accommodated a dozen university students, a music minister, and a priest.
What happened between Friday night arrival and Sunday morning Mass escapes my memory, but what happened during Mass is burned in my very being forever.
When we awoke early Sunday morning, it was so very cold that we could see our breath and nobody wanted to get out of their bag. Our priest managed to coax us all into a circle where he lit a single candle and began celebrating Mass.
We were a group of students in our late teens / early 20s who were two days without showers or enough sleep, shoulder to shoulder in this circle, the candle in the middle, praying together – “Our Father, who art in heaven ….”
All at once the entire room and everyone in it was filled with a presence so powerful as to be both beautiful beyond words and frightening beyond imagination. It was at this moment that I knew without any doubt or question that God was real, and He was sitting in that circle with us. It was literally breathtaking and brings me to tears today as I retell this story.
I remember this so vividly. It was so cold at the start of Mass because there was no central heat and nobody had built a fire in the stove, yet the presence of God’s Holy Spirit warmed the whole space and filled our souls.
Whatever words I use fall far, far short of the power, beauty, and fear that was among us that cold February morning in Spring Green, Wisconsin.
This was my God moment. I have been blessed with being able to go back to that moment many times since then and once again experience the absolute holiness of that Sunday morning long ago.
This Lent, as you prepare for the Resurrection of our Lord, pay close attention to how things around you change and you become keenly aware of God’s presence. Your God moment could be right in front of you. Have you had a God moment and want to share it? I would love to hear about it.
St. Kateri Tekawitha at St. Stephens Mission, St. Stephens, Wind River Reservation, Wyoming.
July 14 is the memorial of St. Kateri Tekawitha, the first Native American saint. The “Lily of the Mohawks”
Converting to Christianity through the work of Jesuit missionaries who had come to her village in New York, she was devout in her faith and consecrated herself to virginity in spite of the repercussions of such an act, and without knowledge that was a desirable action.
She left her village to remove herself from the pagan practices of her people, walking to Sault St. Louis near Montreal, a 200 mile journey. There she deepened her faith, practicing an austere life that included severe fasting.
There is much to be told about her life, and a wonderful resource is at the website Kateri.org where her story is laid out beautifully.
Her day of canonization by Pope Benedict XVI on October 21, 2012 was a great day of celebration for the Catholic community on the Wind River Reservation in Wyoming.
(Just a note about my qualifications for writing what follows. I am a Certified Financial Planner (CFP®) and have been since 1993. I was involved in the investment consulting business for almost a quarter-century. I earned several sets of credentials along the way – Certified Investment Management Analyst; Certified Investment Management Consultant; Accredited Investment Fiduciary – in addition to CFP®. I also spent twelve years as a member of the Board of Trustees of the Wyoming Retirement System, a public pension fund that operated to benefit 50,000 public employees while managing a $5 billion dollar investment fund. I spent two years as chairman of the board, and 4 years as chairman of the investment committee.)
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Sometimes on my drive to the Catholic Center, I will listen to a well-known financial advice-giver, doling out answers to questions about debt, budgets, investments, and money in general. But I am cautious and skeptical regarding his advice and his motives because I have heard him say things to callers that are misleading and inaccurate.
Allow me to get a little nerdy here. In my years as an investment consultant, I was constantly measuring the risk involved in the portfolios of my clients. We were able quantify investment risk using metrics derived from the market movement of various asset classes in relation to the market in general. One of the primary measurements is beta, which provides a value to how an investment moves relative to its index.
Beta is not a measure of risk in itself. Rather, it tells us that if investment A has a beta of 1.0, its movements exactly replicate that of the overall market itself. A beta lower than 1 means it moves less than the market, and greater than one more than the market. It is a way to calculate how much investment return comes from the market, and how much comes from the skill of the manager.
I bring this up because I heard the aforementioned radio host tell a caller that beta tells if an investment is risky or not, which is just not true. This isn’t something that most people would catch or bring up in casual conversation. Neither would most people have that information to challenge the radio host. For me, it makes me wonder what else he is telling his listeners that may be incomplete or misleading.
Beta can be used in conjunction with alpha, which is defined as excess return adjusted for risk. We should realize that even a term like “excess return” can cause controversy in the investment world, but it helps us move our story along. If we have an investment with alpha greater than 0 and a beta of 1.0, it means we have found an investment that has the volatility of its index but returns greater than the index. It is evidence of manager skill, or, perhaps, manager luck.
Our radio host never mentioned alpha. He never talked about indexes, either.
Indexes are unmanaged bunches of stocks or bonds that represent a particular market. The S&P 500 is an index, as is the Dow Jones Industrial Average. There are many, many more indexes which are widely used in the investment world. We can invest in indexes directly through mutual funds or exchange traded funds. This method is employed successfully by many institutions and individuals. We invest in indexes because it is efficient, inexpensive, and beats 80% of active managers in any given year.
He talks about mutual funds, too. He is an advocate for investing in four different kinds of funds – growth, growth and income, aggressive growth, and international growth. He does this, he says, because when one fund is down another one is likely to be up. It is his way of diversifying his investments. This sounds impressive, but in reality it doesn’t solve any problems of diversification.
We can tell how different one fund is from another by calculating the correlation between mutual funds and their respective indexes. A “1” means they are perfectly correlated, in which they move in tandem. A “-1” means they are exact opposites, and move as such. A “0” means there is no relationship at all, and assets move independently from each other. In reality, these four categories of mutual funds tend to have very high correlations, as in .90 +, indicating they are not very different from each other and offer very little in terms of diversification. We diversify investments to manage the overall risk to our portfolio, and buying funds in these four different classes do not help us manage our risk by providing diversification. He essentially has made the same investment four times, like buying CDs at four different banks.
He won’t buy indexes, either. He doesn’t buy them because he says they get “average” returns and he wants better than average. So does everyone else. The problem is it is nearly impossible to pick out managers who get better investment returns than indexes year-in and year-out.
Indexes get market returns, not “average” returns.
Finally, I heard him tell his listeners his funds have produced double digit returns for many years, and that the funds should be able to “stand the test of time,” and that one should look at the returns based on five, ten and twenty-year histories. There is just so much wrong with that statement that it is hard to fit it into the space people might actually read. Let’s look at three of these items.
Returns: His returns are HIS returns, not yours. Your investment schedule and his are completely different. Your returns WILL be different.
Test of Time: Mutual fund managers and styles change constantly. The returns generated by one manager will be far different than those generated by another manager at the same fund. Manager A may be an all-star, while manager B – at the same fund at a different time –a bench warmer. A fund with an impressive record may have generated great returns under manager A, then mediocre returns under manager B who succeeded A when A cashed in on his performance and went to a different fund.
Track record: This is one consideration when choosing a fund, but not the most important by a long shot. Yet it is our host’s primary means of selection. In reality it means very little, because track records are what has happened in the past based on the people involved and their luck or skill in stock selection. Today, those people could well be gone, different methods of securities selection employed, and different reactions to economic factors.
There is so much more to the analysis of mutual funds than I can possibly share in this post, or a hundred more of them.
I write about these things not because this is an investment advice column, but because we are tasked by God to care for the gifts he gave us, returning them with increase.
If we are to steward the gifts entrusted to us, it is incumbent upon us to learn about the care of those things. Abdicating that responsibility to a radio talk show host who knows nothing about you is not the way to do it.
Messages and Images: A Disciple's Journey 