Many investors look at bonds as a passive way to store money they’d rather not risk. But bonds are actually the means for getting things done. We’ll talk with Benjamin Bailey about impact bonds today on Faith and Finance.
Benjamin Bailey is Vice President of Investments and Senior Fixed Income Manager at Praxis Mutual Funds, an underwriter of this program.
- Rob West speaks with Benjamin Bailey about recent bank failures and what it means for the banking system. Bailey explains the multiple factors that lead to the problems.
- Cryptocurrency was a major factor in two of those collapses. And Silicon Valley Bank had a crisis of confidence with its uninsured deposit holders, and they had a lot of large uninsured deposit holders. Another factor is that interest rates have moved much higher in a very short period and these moves cause shocks. If banks bought very long-term investments, then those investments have large unrealized losses for now.
- But most banks manage their risks (on both sides) in a more prudent manner.
- WHY WAS 2022 SUCH A CHALLENGING YEAR FOR INVESTORS?
- Most investors have a mix of stocks and bonds in their portfolios and last year was very difficult for them. A 60/40 portfolio of stocks and bonds had its most difficult 12-month period since 1974. The issue was there wasn’t really a place to hide. Normally, bond returns are positive when stock returns are negative. But in 2022, interest rates started off low and then moved higher very quickly, and so stock values actually moved lower. So adjustments have to be made.
- HOW SHOULD INVESTORS ADJUST IN 2023?
- Rather than riding the emotional roller coaster, pulling out of the market and trying to find the right time to jump back in, stick to the long-term plan. If you work with a financial advisor, have a conversation with him or her to make sure they’re up to date on your true risk tolerance.
- POSITIVE IMPACT BONDS
- Over the past decade the market for positive impact bonds has really taken off. In these cases, the issuer will tell you what areas the money will be going into and if it is to be used for a positive impact.
- This generally means bonds that have a positive impact on creation, the environment, or on communities.
- Investing for Kingdom values through impact bonds can be a core part of your retirement investments.
- Learn more about impact bonds here.
On this program, Rob also answers listener questions:
- What is the best way to start a savings account for a young child and to estate plan as a parent?
Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.