In the world of Faith impact investing, where our goals go beyond financial returns, we are focused on value that has the effect of transforming lives, through Jesus. The journey of sustainably funding the works through profound financial impact and returns is long and often winding, requiring a steadfast commitment to long view or long-term thinking.
As Warren Buffet says, ‘I would prefer a year of 15% followed by a year of 5% than a steady 10%. With this in mind, here we explore the importance of patience in impact investing and outline the strategies we employ to manage expectations and stay on the path of our investment convictions, even in the face of market volatility.
As the 20th in the series of sharing with our cohort, how Mission X’s thesis suggests we are able to outperform the market over the long term, this series is focused on not only the “Why” but the “How” and importantly the ‘Behavioural management’ of the investors, as we join together on this eternity led journey.
Understanding the Time Horizon of Impact
Impact investments, by their nature, work on a timeline that allows for the cultivation and growth of transformative change. Whether it’s a New public market offer, having just gone profitable, developing clean energy solutions or a sophisticated mid-growth social enterprise aiming to improve healthcare access, these ventures require time to innovate, scale, and ultimately deliver on their impact potential. Similarly, the financial returns on these investments, while potentially substantial, may not materialize in the short term. Recognizing and embracing this extended time horizon is crucial for impact investors.
The Role of Patience in Navigating Market Volatility
Market volatility is an inescapable part of investing in any market segment, or investment class!
For impact investors, reacting hastily to short-term market fluctuations can undermine long-term impact and return goals. Patience serves as an anchor, helping investors stay the course through the ups and downs, ensuring that their investments have the necessary time to mature and fulfil their dual objectives.
Strategies for Cultivating Patience
1. Set Clear Long-Term Goals
Here at Mission X we have set clear goals and a deep understanding of our impact and financial objectives. Setting specific, long-term goals helps us frame the manner, method, and decision matrix of our investment strategy. Further, it provides a reference point to return to when market volatility tempts a deviation from the plan.
2. Educate Yourself on the Impact Timeline
Our strongest suggestion to our cohort is to familiarize yourself with the typical timelines for impact in your chosen sectors. Understanding the stages of development and growth can help temper expectations and reinforce the value of patience.
Further, we highly recommend you take the time to educate yourself on markets generally, how they operate, why they operate that way, what are the pitfalls, and where exuberance is a hindrance to markets efficient functionality.
There are many great sources of behavioural investing that we can point you towards, however ‘Beating the Street’, ‘One up on Wall Street’ and ‘The Little Book of Behavioural Investing’ are three we would suggest for every member.
3. Diversify Your Portfolio
In the long view: We take a unique view of diversification as there is a strong case for ‘deworseification’ also. Diversification is a key strategy in managing risk and fostering patience. Our well-diversified portfolio has been designed to maximise the upswing of the market, without ‘protecting’ short-term market fluctuations, as we are long-term holders, the short-term market fluctuations are more an opportunity for buying as the market has moved ‘irrationally’, rather than worry about the ‘current value of the investment’ as our vision is of the future, not today. If the market allows us to buy $1 for $0.70, then we are a net buyer. This principle allows us to maximise the opportunities in the market without the fear of ‘current prices’ (as we are not ‘selling today’)
4. Regularly Review Your Investment Thesis
We periodically review the investment thesis and measure it against 96 criteria, to establish/maintain if our investment in that business has played close to plan, looking at the:
- business’s future prospects,
- performance of management to what they previously committed
- changes in management
- earnings growth performance to our thesis
- product and services optionality/leverage into the future.
This allows us to assess whether the investments are on track to meet our goals. This practice provides reassurance during volatile periods.
5. Celebrate Milestones
We are huge believers in recognizing and celebrating progress towards our impact and financial goals. We celebrate regularly to highlight the impact the investments are having on our mission and the placements we make.
The Transformative Power of Patience
In faith impact investing, patience is more than waiting – the long view; it’s an active engagement with the future.
Our commitment drives us beyond today’s gratifications towards a horizon where investments have the power to effect meaningful change.
By cultivating patience, Mission X (along with our cohort) can navigate the complexities of ‘managing our fears’ through market volatility. Patience in impact investing isn’t just about the endurance of waiting; it’s about the wisdom to see the transformative potential of the long view.
Mission X – Investment Thesis Summary
For more details on how we think about the intersection between faith and funding faith initiatives, specifically the Ministry Training Scheme, check out these articles also.
Please also check out our IP partner Bywine/Qfactor
