Believe and Obey

A Radical Christian Perspective on the World's News & Current Events

A Prudent Money Plan for God's People

Below is a sound, conservative investment strategy for your consideration.  I am not guaranteeing success, nor am I saying this is the only way to succeed.  I am saying that this makes sense to me, and it is, in fact, the way I invest my own long-term assets.  

DISCLAIMER is not a registered investment, legal or tax advisor or a broker/ dealer. All investment/ financial opinions expressed by are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise.


Plan Strategy & Methodology


The Believe and Obey Plan shows step-by-step how to track and mimic the long-term performance of highly successful investors. Using the Plan Portfolio as a model, we illustrate how an investor can develop a strategic plan using a low-cost ETF-based investment approach.

The Believe and Obey Plan also reveals a conservative method for investors to reduce their risk through a tactical timing strategy to protect them from bear markets. The Plan will also showcase a method to follow the smart money and mimic the top hedge funds and their stock-picking abilities. With simple, straightforward advice, The Believe and Obey Plan will show investors exactly how this can be accomplished—and allow them to increase their chances of investment success in the process.

With all the uncertainty in the markets today, The Believe and Obey Investment Plan helps the investor answer the most often asked question in investing today – “What do I do”?


The Believe and Obey philosophy stands upon 4 pillars:

  1. Low cost: As is discussed below the key driver of long-term investment performance is keeping expenses low.  This is as true in investing as in any other business.  Most of the underperformance of the average investor can be explained by fees that are too high.  This is what leads us to passive management via ETFs, as we shall see.
  2. Simple Strategy: An investment strategy should be simple enough for the non-professional to implement.  It is like a light switch; you don’t need to know all the intricacies of the power grid that stands behind it, only when to turn the switch off and on.  This plan tells you exactly when to make a move and does so in plain language.
  3. Rule Based: The temptation to play “hunches” and follow your gut is a sure path to subpar investment returns.  Successful investors have a rule or set of rules that guide their investment actions.  The heat of the moment is no time to formulate strategy.  Choose a strategy that makes sense; look at the back testing, then follow the rule.  Rules based investing removes much of the emotions that can ruin an investment plan.
  4. Emotionally Attainable: This is key.  All the previous three pillars are for naught if the plan is not emotionally attainable.  By this we mean that a plan that expects you to completely ride out gut wrenching downdrafts is simply not realistic.  Most investors bailed out during the massive drops in 2008-2009, locking in substantial losses.  Investors have a long well-documented history of bailing out near the bottom of downdrafts due to emotional distress.  The Believe and Obey Plan is crafted such that you will be safely on the sidelines during such traumatic events.

Let us now turn to the actual methodology of The Believe and Obey Plan


The Need for Passive Investing:

Active investing requires a hands-on approach, typically by a portfolio manager or other so-called active participant. Passive investing involves less buying and selling and often results in investors buying index funds or other mutual funds.

The prime example of a passive approach is to buy an index fund that follows one of the major indices like the S&P 500 or Dow Jones. Whenever these indices switch up their constituents, the index funds that follow them automatically switch up their holdings by selling the stock that’s leaving and buying the stock that’s becoming part of the index. This is why it’s such a big deal when a company becomes big enough to be included in one of the major indices: It guarantees that the stock will become a core holding in thousands of major funds.

Some of the key benefits of passive investing are:

  • Ultra-low fees: There’s nobody picking stocks, so oversight is much less expensive. Passive funds simply follow the index they use as their benchmark.
  • Transparency: It is always clear which assets are in an index fund.
  • Tax efficiency: Their buy-and-hold strategy doesn’t typically result in a massive capital gains tax for the year.

Active strategies have these shortcomings:

  • Very expensive: Thomson Reuters Lipper pegs the average expense ratio at 1.4 percent for an actively managed equity fund, compared to only 0.6 percent for the average passive equity fund. Fees are higher because all that active buying and selling triggers transaction costs, not to mention that you’re paying the salaries of the analyst team researching equity picks. All those fees over decades of investing can kill returns.
  • Active risk: Active managers are free to buy any investment they think would bring high returns, which is great when the analysts are right but terrible when they’re wrong.

So, which of these strategies makes investors more money? You’d think a professional money manager’s capability would trump a basic index fund. But they don’t. If we look at superficial performance results, passive investing works best for most investors. Study after study (over decades) shows disappointing results for the active managers.  This piece from Morningstar goes into more detail.

The Believe and Obey Strategy

The Believe and Obey Plan is designed to take the best from low-cost passively managed funds and merge these strengths with a simple strategy to exit markets before suffering long-term damage resulting from bear markets.

The strategy is simple.  At the close of trading on the last trading day of the month, check to see if the ETF being used (VTI or SPY) is above or below the 10-month moving average.  If it is above the 10-month moving average, then get in or stay in.  If the price is below the 10-month moving average, then get out or stay out.

There are a multitude of free sites to use in determining this.  You can easily set up a 10-month moving average on a chart and insert any ETF to see if its monthly closing price is above or below that 10-month moving average.  

Portfolio Construction:

Asset Allocation:

Believe and Obey Investment Plan followers can quite possibly perform as well as professionally managed portfolios with a simple portfolio comprised of one low-cost exchange traded fund (ETF) designed to mimic the returns of professional managers. This easy emulation does not include: (1) private equity and hedge funds; and (2) active selection of specific assets.  Rebalancing of the portfolio is unnecessary, further lowering costs.

The relevant asset classes and their associated ETFs are:

         Vanguard Total Stock Market ETF (VTI)

The alternative ETFs for each asset class (for tax wash/harvesting purposes, explained below):

         SPDR S & P 500 ETF (SPY)

The portfolio then exploits the return momentum effect for this ETF by allocating the fund to the ETF or to cash when the ETF is above or below the 10-month moving average.  Simple strategy using a simple rule.

Tax Wash/Harvesting:

The wash-sale rule was designed by the IRS to discourage people from selling securities at a loss simply to claim a tax benefit. A wash sale occurs when you sell a security at a loss and then purchase that same security or “substantially identical” securities within 30 days (before or after the sale date).  The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.

While the IRS has not offered absolute certainty with regard to the definition of “substantially identical” securities it has been accepted that selling one ETF and buying another, i.e., selling VTI and buying SPY, does not trigger the wash rule.

The rationale is that the two S&P 500 ETFs have different fund managers, different expense ratios, may replicate the underlying index using a different methodology, and may have different levels of liquidity in the market. Presently, the IRS does not deem this type of transaction as involving substantially identical securities and so it is allowed, although this may be subject to change in the future as the practice becomes more widespread.  AS ALWAYS SEEK PROFESSIONAL TAX ADVICE.

Pursuant to current accepted practice regarding the tax wash rule The Believe and Obey Investment Plan tracks the alternate ETF to mimic the baseline ETF used by the Plan.  In the event of a sell signal being triggered at the end of one month then followed by a buy signal the next, the investor may reenter the market without triggering a negative tax wash consequence.

Tax loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or “harvesting” a loss, investors can offset taxes on both gains and income. The sold security is replaced by a similar one, maintaining an optimal asset allocation and expected returns.  The alternative ETF may be used to facilitate this strategy while remaining in the market.  AS ALWAYS SEEK PROFESSIONAL TAX ADVICE.


Q: Why only one fund?

A: Mirroring the S & P 500 fulfils the first two pillars of our philosophy.  It is the lowest cost way to invest and owning one fund that mimics the broad market is very simple to understand.

Q; Why no foreign exposure?

A: In 2019 43.6% of the sales of the S & P 500 came from foreign counties, which provides plenty of foreign exposure without any currency risk.

Q: Why no other asset classes?

A:  Simply because adding asset classes like commodities, real estate, small cap equities, etc. only drags down performance because it raises costs.  It also adds a level of complexity that is unnecessary.

Q: Why no bonds?

A: Bonds are typically in a portfolio for safety.  That safety in this strategy is provided by moving out of the market when the price moves below the 10-month moving average and indicates it is time to do so.  Also, bond ETFs are relatively expensive and therefore needlessly add to costs.

Q: Why not just hold the VTI for the duration?

A: Doing this would produce higher returns but clearly violates the 4th. Pillar, as it is not emotionally attainable.  The max drawdown for a buy and hold of the VTI is twice that of the Believe and Obey Plan, which means most investors would ultimately panic and sell out near the bottom.  This is in fact what happened during 2008-2009.

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