Investing with a Biblical Perspective
The world is constantly telling us to spend money and consume versus saving and investing. Most Americans have no appetite for sacrifice. Oddly, young adults feel the need to resume the same level of spending and consumption as their parents — instead of working up to that level of consumption as their income increases. These young adults quickly find themselves under a mountain of debt, so burdensome they become slaves to their debt holders. They find themselves working for pennies while their debt burden consumes the bulk of their paycheck. Additionally, the world’s perspective on investing is so shortsighted that we expect our investments to deliver lottery-like returns. The sage’s advice on buying low and selling high is interpreted as finding the rare deal that will instantly deliver overnight riches — instead of holding the investment, allowing it to grow.
I published a brief article a year ago that is worth revisiting.
Investing Is Like a Teeter-Totter
I remember as a child my friends and I would spend time occasionally at the local park on a teeter-totter, obviously not using it as it was designed but trying to knock one another off to claim victory. This game was like the king of the mountain. The winner was usually the one with the best balance and tactical foresight that day. I have doctored my share of lumps from these beasts. Teeter-totters were more fun than the simple seesaws because they not only went up and down vertically, but they also went horizontally. It was much easier on a teeter-totter to catch your foe off guard and force him to lose his balance. These recreational contraptions are a rare find at your local park today because safety advocates have sought to ban them because of accidents. REALLY! Sometimes the simple things in life make the best analogies.
The stock market invariably goes up and down in value, but sometimes, it also goes sideways, much like the old teeter-totters. What many people do not understand about the stock market is that money is not made in the up position but on the rise and fall of the market or the sideways movement, just like a teeter-totter. In down markets, it is easier to find deals below market value. If you are using a systematic investing program, these below-market deals take advantage of dollar-cost averaging as the overall market falls in price. If the market is going up, you witness an increase in value. Additionally, reinvested dividends can significantly increase the growth of your investment portfolio. In a sideways market, you maintain the same stock values but can continually add to your portfolio investments by just holding your position.
The stock market is not a place to invest, hoping to capitalize on short-term movements in the marketplace. Most people get in trouble trying to time the market. The stock market is a long-term investment program. We often forget what the Bible tells us in Proverbs 13:11.
Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. (Proverbs 13:11 ESV)
Austin Pryor, along with Mark Miller, in their book Sound Mind Investing Handbook, believe we must put specific strategies in place to prevent getting out of focus with our investment plan. The authors describe setting boundaries to keep you on course with your investment objectives. These boundaries include using mechanical guidelines instead of your intuition and judgment like risk analysis profiles and adhering to your season of life, building a broadly diversified investment portfolio to protect against volatile market risk, developing a long-term get-rich-slowly approach, accepting responsibility for your decisions and seek counsel when appropriate (Pryor & Biller 2021). These boundaries make up the foundation of your investment program.
It is only when we accept the worldly view of life that we fall short of God’s plan for us. God has graciously provided us with his playbook to live by, but the world often entangles us, and we lose track of our long-term inheritance in Heaven. I urge you to set your life on a firm foundation and follow the path God has laid before you, including your investment program. I miss the old teeter-totters.
Crossway Bibles. (2007). The holy bible ESV: English standard version: Containing the Old and New Testaments.
Pryor, A., & Biller, M. (2021). The Sound Mind Investing Handbook: A step-by-step guide to managing your money from a biblical perspective. Moody Publishers.
The biblical perspective of investing differs from what the world is telling us. If we follow a systematic approach, guided by God’s word, our investment decisions become more focused and aligned with our Christian values. We must first acknowledge that He is the center of all we do, including our investment decisions. Below is a sequence of 11 investing principles along with their biblical reference. Please visit the biblical scriptures associated with each principle to gain a better understanding of how God desires us to invest.
1. Saving/Investing First (Proverbs 24:27 NKJV)
2. Preservation and Steady Growth of Capital (Proverbs 28:20 NKJV)
3. Long Time Horizon (Luke 14:28 NKJV)
4. Time is a Tool (Proverbs 6:6–8 and Proverbs 28:22 NKJV)
5. Cycles are Inevitable (11 Peter 3:4b NKJV)
6. Diversification Strategy (Ecclesiastes 11:1–2 NKJV)
7. Seek Wise Counsel (Proverbs 19:20–21 NKJV)
8. Avoid High Leverage (Proverbs 22:7 NKJV)
9. Monitor Your Anxiety (Philippians 4:6–7 NKJV)
10. Establish Limits on the Amount You Invest (Proverbs 15:16 and Proverbs 30:8–9 NKJV)
11. Spousal Unity in Decision Making (Ephesians 5:33 NKJV)
Investment strategies typically begin with an analysis of your risk tolerance, experience with investing, life goals, and season of life. Depending on your earning season, your investment strategy will move from accumulation in your early life stage to preservation later in your career. We must also consider the tax implications of our investments and our need for future income. Sometimes, those investors who have an overabundance of free cash flow may decide to enter the speculative stage. However, speculation without the additional free cash flow is just foolish. You cannot borrow to invest or risk your life earnings with money designated to provide for you or your family. A better place for an abundance of free cash flow may be charity, where it can expand the kingdom of God or provide for those less fortunate. The question that needs to be asked is “How much is enough”?
Another strategy used is diversification. Diversifying our investments can decrease the overall risk associated with investing. We often categorize investments by “asset type” such as stocks, bonds, real estate, commodities, etc. We further define these asset types to include large cap, small cap, international/global stocks, bonds, and commercial or residential real estate investing. Sometimes, real estate investing can take the form of publicly traded or private stocks or REITs (Real Estate Investment Trusts). There are many avenues of diversification depending on the individual investor preferences or the professional investment manager styles. There is no “perfect” investment strategy. However, none of these strategies should be undertaken without prayerfully considering the consequences and seeking wise counsel.
If any of you lacks wisdom, let him ask of God, who gives to all liberally and without reproach, and it will be given to him (James 1:5 NKJV).
Listen to counsel and receive instruction, That you may be wise in your latter days (Proverbs 19:20–21).
In summary, investing is a long-term program. Never try to “beat the market” by playing a short-term game. I have never met a “day trader” who has consistently made money. Over the long run, day traders lose more money than they make. Remember, you are competing with expert investment managers who still cannot match the returns of the broad S&P 500 index over 80% of the time. No one is an expert at everything, and our risk preferences can vary depending on our tolerance for loss and our season of life. Diversification is one of the best strategies to use for your investment plan. Always adhere to your convictions and do not invest in something that goes against your principles. Stay away from the worldly view of investing and follow the basic principles found in the Bible. Have a reason to invest and forego greed and unnecessary consumption. Pay off all debt and have adequate reserves set aside. Do not presume the future. Give excess to charity. Ask yourself “How much is enough”?
Your faithful servant