Biblical Principles for Investing
Post on: 23 Июль, 2015 No Comment
by Chuck Bentley on Tuesday, September 24, 2013
Many of us are still working but also preparing for the day when we’ll be heavily dependent upon retirement income. It’s important to be wise investors, whether it’s for future retirement or simply to be excellent managers of what God has entrusted to our care.
Here are three biblical principles that represent a timeless, proven guide for investors regardless of economic conditions.
1. Pay off all debt, including your home mortgage.
Although this is often looked upon as a personal financial choice and not an important investment decision, consider the following:
- By eliminating all interest payments on debt, you have a guaranteed return while all other investments are speculative.
- You’ll always have a place to call home without fear of foreclosure if something interrupts your income stream in retirement.
- Freedom from debt affords flexibility to make adjustments in your asset allocation as needed. This is one of the most important investment decisions for Baby Boomers.
2. Follow Solomon’s principle of investing outlined in Ecclesiastes 11:2.
Give a portion to seven or even to eight, for you dont know what disaster may happen on earth (Ecclesiastes 11:2, HCSB).
This is better known as the principle of diversification.
Solomon reminds us that we don’t know the future and therefore we cannot know what is certain and uncertain regarding our investments. Because of this risk, we are wise to spread our investable income across a variety of investment options. A diversified investor should have no more than 12 to 15 percent invested in any single asset or category.
The chart Diversification of Investments demonstrates seven unique asset categories. A diversified portfolio will spread about 15 percent across each of these categories. For example, it’s not considered diversification if you have all of your investable assets in seven different mutual funds or stocks that are all focused on energy. Beware of putting all of your investments into a single asset class because of the promise for a higher overall return.
A diversified investment plan includes stocks, bonds, and a variety of other investment options to reduce risk. Alternatives to publicly traded stocks and bonds are gold, real estate, small businesses, art, collectible cars, etc.
It’s important to remember that a properly diversified plan will typically lower the risk for loss and the overall average returns will likely be lower as well.
3. Don’t invest in anything you don’t understand.
If it’s too complicated or you simply don’t understand the business or investment opportunity, then don’t invest. Apply this biblical principle to your approach to selecting investment options:
A house is built by wisdom, and it is established by understanding; by knowledge the rooms are filled with every precious and beautiful treasure (Proverbs 24:3-4, HCSB).
I have counseled far too many investors who have lost their lifesavings on a bad investment or eight, for you don’t know what fraudulent scam. Typically, they didn’t understand the investment and they violated the principle of diversification out of excitement over the promise of higher returns. Before investing, seek counsel and advice from a wise professional who has a Christian worldview.
We are in a turbulent economy and navigating through the myriad of investment choices can be daunting. Follow these three simple biblical principles and you will reap the benefits of God’s wisdom.
Chuck Bentley is CEO of Crown, a nonprofit business and personal finance policy and host of the nationally syndicated radio feature, My MoneyLife. For more information, go to crown.org.