Does God Care How I Invest My Money?

The Christian investor must, first and foremost, seek the Lord’s wisdom.  God has given us principles and boundaries in the Bible which can help us define our priorities and develop an investing strategy.

The following four very practical investment boundaries, based on scriptural principles, can assist in maintaining a focused Christian investment strategy:

1) Objective, mechanical criteria for investment decisions.
He who trusts in himself is a fool, but he who walks in wisdom is kept safe. (Prov. 28:26)

Mechanical guidelines not only help you choose investments that fit your situation, they can help you control your losses.

When you buy an investment that doesn’t perform well, it can be difficult to admit it didn’t work out. In fact, many investors hold onto poor investments for years hoping they can at least finally “break even.” You can avoid this kind of “emotional trap” by following a mechanical guideline that says, “I’ll sell if it drops x% from where I bought it."
Another recommended mechanical guideline is called dollar-cost averaging. This is an investing discipline that calls for investing the same amount at regular intervals (such as once or twice a month). The investing discipline imposed by dollar-cost averaging is helpful because our judgment tends to be unduly influenced by news events of the moment. Dollar-cost averaging protects you from overreacting (along with everyone else) to the crisis or euphoria of the moment.

In short, mechanical guidelines help you rein in the powerful emotions that cause many investors to do precisely the wrong thing at precisely the wrong time.

2) A broadly diversified porfolio to protect against the uncertainties of the future.
Give portions to seven, yes to eight, for you do not know what disaster may come upon the land. (Ecc. 11:2)

Since we don’t (and can’t) know the future, we can never know with certainty which investments will turn out most profitably.  If you diversify your investments, you won’t be overinvested in that part of the market that gets hardest hit by whatever financial storm might blow through (and most of the time you can’t know in advance which part of the market that will be). Diversifying also ensures that you will have at least some investments in the part of the market that is the rewarding at any given time.

If you take that approach, here are some of the things you’ll then be able to do:
You can ask hard questions of anyone trying to sell you an investment. Make them support and document every assertion, promise, or guarantee.
You can ignore all forecasts by the “experts" and media explanations of why the markets are acting as they are. Did you know that almost every item of economic news has both positive and negative implications? For example, lower interest rates are good news if you’re a borrower, bad news if you’re a saver. If lower rates cause the stock market to go up, the media say it’s because low rates are good for the economy; if the market goes down, the media say it’s because low rates encourage renewed inflation!

You can ignore most of the mail you receive promoting investment advisory newsletters, especially the ones that promise “easy” or “guaranteed” profits. There’s always a possibility that you can lose your
money in the markets-it’s irresponsible to imply otherwise. Such claims by any newsletter writer (or broker or anyone else) should immediately raise a red flag in your mind.

3) Develop a long-term, get-rich-slow perspective.
Dishonest money dwindles away, but he who gathers money little by little makes it grow. (Prov. 13:11)

Fewer things cause more losses for investors than a short-term, get-rich-quick orientation to decision making.

Unfortunately, patience is in short supply among investors. But patience, i.e., a long-term view, is extremely productive when investing — and Christian investors should remember that patience is also a fruit of the Holy Spirit!

A long-term perspective has three major benefits:
• It allows you time to do first things first. I’ve already discussed the importance of being debt-free before proceeding into stocks, bonds, and other investments (other than those in your retirement plans). Once that foundation is laid, you can handle market risk with greater confidence. In the face of market setbacks, a long-term view says, “I’m investing with my surplus funds. This sell-off is no threat to my immediate well-being. I’ve got time to be patient and wait for the recovery.”

• It allows you to let those “once-in-a-lifetime, you-don’t-want-to-miss-this-onebut-you-must-act-now” deals go by. You’ve got plenty of time, and you don’t want to invest in anything you haven’t had time to carefully investigate and pray about.

• It allows you to be more relaxed when your judgment turns out less than perfect. For example, those times when the stock you just bought goes lower or the one you just sold goes even higher. Why let that
frustrate you? In your saner moments, you know it’s unlikely you’re going to buy at the exact low or sell at the exact high. Taking the long view says, “It doesn’t matter whether I bought at $14 when I could have bought at $12. The important thing is that I followed my plan. Over time, I know my plan will get me where I want to go.”

4) A manager’s (rather than owner’s) mentality.
Every prudent man acts out of knowledge, but a fool exposes his folly. (Prov. 13:16)

Accepting management responsibility for your decisions, leads you to acquire knowledge of the basics of investments and money management and seek counsel when making important decisions.