Chapter 5

Investing for the Future

From the booklet Solve Your Money Troubles!
By Robert Morley

There once was a rich business baron who decided to go on an extended trip to a foreign country. He called his most trusted lieutenants to a meeting to divide up his assets to manage until he returned. To the first he gave the equivalent of five bars of gold, to the second he gave two bars, to the third he gave one.

The first lieutenant went off and wisely invested the five bars and, in time, doubled it. Likewise, the second lieutenant went and traded and eventually turned the two bars of gold into four. But the third lieutenant went and hid the money and did nothing.

When the businessman finally came home after his long absence, he called his servants to give an account of their work. To the first two lieutenants, the businessman said, “Well done! I will make you chief executive over many things.”

Then he turned to the third lieutenant. “How did you do?” he asked. The man replied, “I knew you were a hard man, who drives a hard bargain. I was afraid to do anything with what you gave me. Instead I just hid it, so I wouldn’t lose it. Here is your money back.”

The rich man looked at him with disdain. “If you knew I was a hard man, why then did you not at least put the money in a bank account where it could earn a little interest?” he asked. “You’re fired.”

As is illustrated in this Matthew 25 account, to those who faithfully use what they are given, even more will be entrusted. But those who are unfaithful, even what little they have will be taken away.

The Bible teaches a principle of building wealth over time to take care of your financial needs as you grow older. It is also biblical to leave an inheritance for your family if possible.

Yet, planning for future financial stability is a difficult prospect in today’s uneasy economic climate. Financial earthquakes have rattled investors and made it difficult to discern where to put your money.

Where is the best place to invest? That is an age-old question that requires considerable research on your part.

The Stock Market

Some have asked whether it is permissible or advisable for a Christian to invest in the stock market. Romans 14:23 states that “whatsoever is not of faith is sin.” That principle should guide your decision making perhaps more than anything. If you cannot invest in the stock market without violating your faith, then you should not do so.

However, if you are comfortable with taking some risk with a portion of your wealth, then the market can be a consideration. “The greater the risk, the greater the reward” is a common investing adage. Historically, the market has produced a reasonable return for investors over the long haul. Stocks have yielded an average of around 7 percent each year after inflation over the last 200 years. But don’t be lulled into complacency by averages. There have been some periods, most notably the last decade, where the stock market has lost money. As Vanguard Chief Executive Bill McNabb recounted, “If you’re in your 20s and are just starting to save for retirement, you’ve seen the market drop 55 percent, climb 88 percent, and drop again in a short span. … If you’re in your 30s and have been saving for the past decade, you’ve seen the stock market return essentially 0 percent.”

With the advent of online brokerages, investing in the stock market has become quite easy for investors. Trade commissions are relatively inexpensive. An abundance of online research can be accessed with a few clicks of the mouse. The result has been a large influx of unskilled investors making “day trading” quite popular. Day trading can be very risky and generally springs from a speculative or “get rich quick” mentality that is not biblical.

Principles of Investing

Should you choose to invest a portion of your wealth in the market, never invest your “emergency savings”! Investments should only be made after you have established your six-month emergency fund.

Many experts recommend investing in mutual funds or other managed packages to introduce new or inexperienced investors to basic principles of market dynamics. Mutual funds invest small portions in many companies and have the benefit of diversification, which reduces risk. If one out of 100 companies goes bankrupt, you have only lost 1 percent of your investment. Had you invested in only two companies and one went bankrupt, then you would have lost 50 percent of your money.

Mutual funds can be a safer alternative than trying to do all the research, monitoring and trading yourself. The downside is that you typically pay a small percentage in fees to the mutual fund manager.

Those with more skill, time and understanding might do better investing on their own, thus saving commissions paid to others for managing their resources. Consider a few basic guidelines if you are planning on investing in the market.

It is a good idea to only invest an amount you are willing to lose in its entirety should something drastic happen. If you can’t afford to lose the money you are investing, then you probably shouldn’t put that into the market.

Diversify your investments to protect yourself against catastrophic losses in case the sector you are investing in takes a dive. If you spread your holdings out, it is generally true that in the long run, you have spread your risk and should see some gain on your investment.

Don’t invest all your money in just one stock. Most people who invest in individual stocks underperform compared to the general market. A balanced approach that spreads your risk over a variety of companies often leads to long-term growth.

Invest in companies after you have researched what you are supporting. Many companies produce goods or services that might violate your moral or spiritual principles. If you are careless, you may unwittingly end up helping to fund companies that, for example, distribute pornography, support bio-tech (genetic engineering), produce pharmaceuticals or manufacture military weapons. Make educated choices about where to put your money. If you believe in the product of the company and feel it has a strong, stable future (as much as you can determine), that could be a worthwhile investment.

Consider managed funds as an investment, but make sure you understand how your fund is invested. A little time spent with a broker or online research will reveal the holdings of the fund. Use the same considerations mentioned above: If the fund is invested in companies you don’t agree with, don’t invest in that fund.

Monitor your investments—but don’t let this become a god in your life. If we are daily focusing on the movement of our investments, it will come at the cost of something in our lives. You might have to give up sleep, time with your family, prayer and study time or some other activity if you become engrossed with your portfolio. Take time to understand your investment and periodically check on its position, but don’t let it preoccupy your thoughts.

The market has convulsed radically in the past several years. Greed and deceit have gripped many investors and corporate executives, leaving once-solid companies in a shambles. Corporate giants have gone bankrupt in mere days or even hours. In many countries, interest rates paid on savings accounts and timed deposits are low.

So where should you put your money? A balanced, diversified approach can hedge against this risk. It is a good idea to spread your risk over a number of investments to better insulate yourself against radical economic swings.

It might be a good idea to have a strong cash balance in savings and timed deposits. But considering that these will yield such low returns, if you can afford it you might consider other investments such as precious metals, stocks and mutual funds.

Again, however, if you can’t make those investments in faith, you should avoid them.

Spiritual Investment

As the world suffers through painful financial loss and restructuring, it is clear that we must first invest in our relationship with God.

Jesus Christ gave highly relevant counsel in Matthew 6. As Christ addressed a typical person’s concern about providing food, clothing, health and shelter for themselves and their families, He said, “Therefore take no thought, saying, What shall we eat? or, What shall we drink? or, Wherewithall shall we be clothed? (For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things. But seek ye first the kingdom of God, and his righteousness; and all these things shall be added unto you” (verses 31-33).

Prophecy shows there is a time fast approaching when our money and investments will not be sufficient to protect us from the tribulations coming upon all the world. That is why the best investment advice we can give is to first invest in your relationship with God and trust Him to take care of all your needs. He will guide your investments and help you to make wise decisions on how to protect yourself financially.

Continue Reading: Chapter 6: Plan Your Estate