Dear Fellow Investors and Friends of ADF:
My most recent letters have discussed some aspects of the current economic and financial system crisis and how ADF is faring. Our key measures of strength, such as loan quality and loan loss reserves, net assets (equity), and liquidity remain strong in spite of pressure on our earnings due to the historic declines in the financial markets. Thank you for your continued confidence in us and your ongoing commitment to good stewardship and Kingdom advancement.
I want to encourage you in your well-doing to continue to follow sound investment/savings principles as you assess the current environment. As always, you must consider your financial goals, your need for income and cash, setting aside funds for emergencies, your time horizon for investing, and your tolerance for risk. These are wise, biblical principles for a steward. Of course, it is also important to not allow fear to keep you from continuing to give to the Lord's work.
Another key financial principle is diversification. This entails spreading your investments over a number of asset classes (like stocks, fixed-income securities, cash, etc.). In normal times, many asset class values move in dissimilar or even opposite directions so losing in one asset class would be offset by gains in another. While values may converge in unusual times like we've been experiencing, the principle of diversification still applies. ADF can be an excellent component of your diversified investments, covering the cash/liquid aspect, as well as the general fixed-income portion.
One very effective way to diversify even within the fixed-income area is to “ladder” maturities. For example: a person could place $1,000 in each of a six-month, one-, two-, three-, four-, and five-year investment certificate at various rates (ADF rates for these currently range from 3.15 percent to 4.10 percent). Since there are certificates maturing regularly, the investment would be at current rates. If rates go up, there are lower rate funds to reinvest at the new, higher rates. If rates go down, there are still funds “locked in” at current, higher rates. Therefore, whether interest rates go up or down, the investor is positioned to be protected and get a better overall return. Please contact us if you'd like to discuss this idea further.
Once again, thank you for placing some of the funds God has entrusted to your care in ADF investments, where they can grow in a secure place and provide strategic facilities for Alliance ministries.
As always, your questions and comments are most welcomed and appreciated.
Sincerely,
Lawrence L. McCooey
President
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