Diversify

As we look at investing and have confidence that the natural state of things is to grow, then one of the keys that many investment advisors will tell us was actually published in the Bible long before they became aware of it. Diversify! Read Eccl. 11:1, 6

 Ship your grain across the sea; after many days you may receive a return. Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land…Sow your seed in the morning, and at evening let your hands not be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well.

The reason to diversify and spread our investments out between different areas and venues of finance is that it minimizes risk. If we hold a variety of investments that perform differently in various environments, then we are protected from loss if one area goes bad. This minimizes risk or as some will say…it is a hedge. What that means is it functions as a hedge against losses.

Bill Gates sold some of his stake in Microsoft years ago to diversify his holdings. The money was then invested in other areas that created financial return. If he would have held all his Microsoft stock he would have made more than if he would have diversified, however he saw diversity as that important he was willing to earn less to achieve it.

Another practical reason for a Christian to hold a variety of investments that perform differently in various environments is that each one will be an education for us. As we try different things, I believe we will find one area that has more “grace” for us than others. So maybe we can grow that area significantly while maintaining the other areas of investment.

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Fear

Fear causes people to panic when the market is dropping. Obviously this makes for poor long term results. The experienced investors beat the inexperienced investors in down markets, because the inexperienced investors panic and sell and the experienced investors buy when the market is down. History has shown that the best time to buy is during times of distress, however very few have the courage, means and discipline to do this.

Be realistic about expected investment returns. Generally speaking 10% is the maximum benchmark over the long term. If anyone is offering you significantly more than this, it should raise a red flag of warning for you. Don’t expect to beat the market averages. Your long term investments should be based on buying and holding good investments, not trying to time when you should be in or out of a particular investment.

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Greed

Greed will push an investor to think they have some special insider information and can predict what markets do. Markets generally have the current economic information calculated in to the current pricing. The market does not have the unexpected information calculated in and that is what makes it volatile and susceptible to insider trading. Rapid, reactionary trading is called active investing and accumulates multiplied fees and taxes that passive investing does not. 

What you have to remember about buying and selling securities or commodities in markets is that every time you are selling something because you think the time is right; for the transaction to be completed successfully, there is someone else on the other end of the trade thinking this is the right time to buy. So it really does put you in competition with them…trying to outsmart them or beat them…rather than holding on to shares for a long period of time and growing with the investment.

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Trees Grow

We need to consider the value of our time when deciding our investment strategies. Real estate investing can be very lucrative but it will require some of our time. In the same way starting and operating a small business is a very time intensive investment as well, but it is many times the surest vehicle to financial blessing.

Investing in markets via Mutual Funds, Bond Funds, Real Estate Investment Trusts and other financial vehicles are both time efficient and profitable. They allow us to not put a lot of extra hours into our investments. It has often been stated that instead of us working for dollars, our dollars should work for us. However, there are some parameters that we must be aware of while investing in markets.

If we believe that the natural state of creation is growth and reproduction then we will invest in financial markets. Growth is the natural order of things. One financial advisor puts it like this, “Trees grow.” This profound but simple statement is one to remember. In other words optimism and planning for long term results are usually rewarded. Growth is the natural state of economics.

Proverbs 25: 25-27 speaks to this truth that the natural state of things is to grow. When the hay is removed and new growth appears and the grass from the hills is gathered in, lambs will provide you with clothing, and the goats with the price of a field. You will have plenty of goats’ milk to feed your family and to nourish your female servant.

In other words investing in markets allow you to increase wealth over a long period of time from an arm’s length. There are pitfalls however: Greed and Fear. We will discuss these in upcoming posts.

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How Hard Do You Want to Work?

To create wealth we cannot think in terms of an hourly paycheck. If we are putting our time in and waiting for our monthly paycheck, we will have our needs met but we will not prosper. Our paycheck will be limiting and not allow us to do all the things God has asked us to do.

For example, as long as we are driving a truck making deliveries we will only be able to make so much money in one week, because we are limited in the number of deliveries we can make by the hours of the week. If we are going to prosper making deliveries, we need to find a way to get more trucks on the road. Or consider the difference between a laborer who works for pay and a farmer who plants seeds. To be a successful farmer, you must develop a sense of dominion. You have to be confident that your mind can produce more than your hands.

Let’s say you have the choice between selling pens for a living or shining shoes. The amount of money to be made shining shoes is capped by the hours of the day. The amount of money to be made from selling pens is not limited because someone else produces them and you can order any amount to be sold. You could sell 500 one day and 50,000 the next day. Pens could be marketed on an internet site that takes orders from around the world 24 hours a day  and shipped from a wharehouse without you even expending any energy. Thinking this way helps to frame our efforts to create wealth.

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An Unquenchable Fountain of Ever Enlarging Opportunity

A few years ago I had the opportunity to visit the Cape of Good Hope in South Africa. I watched the 40 to 50 ft. waves repeatedly crash against the rocks one after another. The ocean spray went hundreds of feet in the air after impacting the rocks. It struck me that we do not have a power problem on the earth. There is plenty of power. We have a problem with harnessing power. It is a technology problem not a lack problem. There are still plenty of untapped resources on the earth that are available for all of us to prosper.

This principle is important when discussing investing and creating wealth because if we feel like we are competing with others for a limited piece of the pie this will stifle our creativity. If we think one person’s prosperity makes other people poorer, it will limit our desire to grow, create and prosper. We should live in a world of abundance, not one of limitations. With a little bit of creativity we can find a way for some economic win/win vs. a win/lose. Jesus had an abundance mentality. He said the “fields are white unto harvest”. An abundance mentality means that rather than seeing life as a competition with only one winner, you see it as an unquenchable fountain of ever enlarging opportunity, resources and wealth.

If we have an abundance mentality, we won’t compare ourselves to others and will be genuinely happy for their success. We are not trying to “keep up with the Joneses,” we are on a mission from God to fund His Kingdom and our destiny. It is between us and Him. It has nothing to do with comparing ourselves to the “Jones”. We can learn from others but we are not in competition with them.

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Create Wealth

In previous blogs we discussed the need for us to be fully convinced that God wants us to prosper financially. If we are convinced of this, then we will have the godly desire that will drive us to change and take creative actions and not feel guilty when God prospers us.

One of the reasons people feel guilty about prospering financially is because they are told that there is a fixed amount of money in the world and the more they have the less someone else has. This is not good economics. It is not a fixed economic pie. If you have a bigger piece of the pie it does not mean someone else has a smaller piece. Or if I have a car it does not mean that someone on the other side of the world does not have a car. The truth is most nations of the world have a growing economic pie so that all can have a bigger piece. That is why Gross Domestic Product (GDP) increases every year except in times of recession.

A number of modern economic theories view man’s primary role on the earth as a consumer. A biblical worldview gives us a different picture. We were meant to be producers first and consumers second. In Genesis chapter one it states that God created us to be fruitful and productive. We should not look at consumption as our primary purpose in life. This is a secular worldview that lacks any sense of destiny…sometimes stated, “eat, drink and be merry for tomorrow we die.”

The secular person views an additional child in a family as another mouth to feed rather than another person to contribute to the production of food. This view is based on an expectation of scarcity and limitation. The same person will say there is not enough water in the world for the growing population. The truth is we do not lack for water on the earth. The oceans are full of water. The challenge is to obtain drinkable water, which drives us to discover the needed technology for water purification. The lack is not water; the lack is ideas and technology. So that additional child that is born just might be the one that discovers the water purification technology we need.

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Revisiting the Parable of the Talents

For us to prosper we have to understand that investing is a good and godly thing. A lot of Christians think that the parable of the talents is about spiritual gifts. We are confused by the term “talent” which, as it is used in Matthew 25, is actually an amount of money. Jesus was talking about faithfulness within the context of our finances. Just so their is not any confusion on this in verse 27, it states,”Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest.” He is talking about investing money.

In Dr. Anderson’s book, Becoming a Millionaire God’s Way, he tells the historical economic story behind the parable of the talents. It really was about money and investing.

The details are not given in the gospels, but from history we do know some of the investment options available to them. In the early Roman Empire, the government raised money by selling contract bonds or taxation bonds. In other words, you could invest money in the government and earn dividends on your stock. This was happening before Jesus was born and continued long afterwards. The servants in the parable took money and invested it in what could be considered the world’s system. The opportunities were available to anyone with the initiative and the awareness to notice them and take advantage of them.

It helps us to see that Jesus was referencing the financial markets of the day which in principle are not that much different than the markets we have today. The stewards who was faithfully invested the money were rewarded and the one who didn’t was punished. God is OK with you making prudent investments and realizing the reward of them.

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Hot Tips for Investing…Not!

“…when the Native Americans sold Manhattan Island, New York City, to Peter Minuit of the Dutch West India Company for $24 in beads and trinkets, they did not get a bad deal. If they had invested that money at an 8% annual rate of return, that $24 would be worth $27 trillion dollars today. They could today buy Manhattan back and have plenty of money left over. The problem was not the amount of money but the lack of a plan for it.” Robert T. Kiyosaki, Rich Dad Poor Dad

This might surprise you but the key element in the previous scenario is not the percentage of return on investment but the amount of time over which the investment is calculated. If you are expecting God to give you some hot, new, never-thought-of-before, high return financial investing ideas…get over it! He might give you some unique ideas eventually as you learn to apply the basic, common sense principles in this book, but for now he just wants you to start somewhere. To deaden your excitement even more let’s look at another quote about investing from Robert T. Kiyosaki:

“…many people think investing is this exciting process where there is a lot of drama. Many people think investing involves a lot of risk, luck, timing and hot tips…to me investing is a plan, often dull, boring and almost mechanical process…”

For most of us it will likely start with the difficult discipline of saving some money so we have something to invest. Not only will it be dull and boring, but it might be painful as we limit spending to set money aside for investment opportunities that come are way. The wealthy practice a principle called “delayed gratification” which I think is self explanatory.

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Let’s Get Started

You might recall that the spirit of poverty leaves you feeling like your finances are out of control. The money comes in and goes out without you having control of it. Here are some risky, beginner suggestions to help you practically take dominion over your finances. Consider these ideas and take some action as the Lord is leading you. You should be taking action on at least three of the following 15 items.

  1. Understand what the scriptural power of the tithe is and do it with faith in your heart that God will pour out overflow to you.
  2. Deposit your money into savings and “own it” for a while before moving it into checking to pay bills. Even if it is only for a few days, it will change your thinking and give you a sense of dominion. Works in Kenya with M-pesa.
  3. Take dominion over your finances and pay a bill early instead of waiting until the last possible time. You take authority and decide when to pay the money.
  4. Most poverty stricken people have filled their lives with second rate possessions. Buy something you don’t need but can afford. It should be one nice item of lasting value like a watch or picture for the wall. Get something that you can keep at a very visible, prominent place. Don’t buy the cheapest or even the best deal, but purchase something beautiful that feeds your soul. If you need to do this to break a poverty mindset, you will find it a struggle to do. Buy something you can pay for with cash.
  5. If you have never owned any stock, set aside $150 and buy a few shares of stock to own.
  6. If you have never given away one hundred dollars at one time, do it as soon as you can save it up.
  7. Subscribe to a year of the Wall Street Journal. Let your soul prosper as you read.
  8. Plant or expand some flower gardens around your house. Beauty feeds your soul.
  9. Fix something that is broken around your property. Especially something that has been broken for a long time. Repair or replace it permanently and with good quality materials.
  10. Sign up for a course at a community college or trade school. Look for something you like to do or think you would enjoy. It could be something career oriented like a marketing course or something that feeds your soul like an art course.
  11. Take half of the time you are presently spending on entertainment and use if for learning. Be specific and measureable. Read an economics book instead of watching your favorite sports team.
  12. Follow Dr. Thomas Anderson’s formula to measure if you are on track with growing your net worth for your age.
  13. Develop a ten year financial plan that makes adjustments in all four elements of net worth: income, expenditures, savings and debt.
  14. Find a quiet place and pray the prayer, “Holy Spirit, teach me to prosper”.

I recently came across an old African proverb. Here is what it said…”The best time to plant a tree is twenty years ago. The second best time is now.”

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