Principles have boundaries within which you should operate in order to maintain safety and security in your life and finances. The LORD Provides this protection to us through the knowledge, understanding, and wisdom we get from our intimate relationship with Him through the Holy Spirit, which is always in concert with biblical instruction.
For example, the parable of the talents and minas share a few lessons with us. First, the LORD expects us to invest a portion of the money He provides us throughout our lives. Second, He expects that we will put a reasonable portion in investment with high-growth potential that would increase them 30, 60, 100, or 1,000-fold. Third, even if we do not put money in investment with high-growth possibilities, He expects we would at least put a reasonable portion of the money in financial institutions to create compound interest growth on top of the original principle. Fourth, He will during The Final Judgment call people to account of their stewardship of money He provided. We will also feel the results of poor stewardship while on earth.
Some people wonder if they have to invest in stocks at all or any other specific type of investment (bonds, real estate, etc.). The reality is that the bible does not mention present-day stock or bond or other investments people may try to sell you, but it does tell you that blessings and rewards (such as future enormous growth) accompany consistent trading, which equates to investing in such equity-based products.
Over long periods of time (5-10 years +) the broad stock, bond, and real estate markets have historically experienced enormous growth (higher stock prices, higher real estate values, etc.), even though there is no guarantee that this will always happen every day, month or year in the future. People who have greater risk tolerance may be willing to take the increased risk of investing in these vehicles because of they believe history has shown them to be far better long-term growth products than putting money in low interest savings accounts and the like. Usually they will not panic and sell the investments they previously purchased when the market periodically goes south. Thus, they will likely increase their investment over the long run because 5, 10, or 20 years ago they bought the investments at prices much lower than the stock prices will be when they decide to sell.
People who don't have the risk tolerance to sit still through up and down swings generally do the opposite and thus lose money. They buy stocks, bonds, and real estate, etc. at high prices (due to euphoria when the market seems to always be going up) and sell at lower prices (due to fear when the market seems to be heading down). If one truly has greater risk tolerance he would probably always be invested in some level of these investments and continue to invest in these sectors on a dollar cost averaging basis over the long-term (equal periodic investments). He would likely only reduce these portions of his portfolio to appropriate levels given his rising age.
Nobody knows when a down market will rebound, not even market-timers and day-traders. That’s why a very high percentage of them usually lose more money than they make trying to time stock and bond trades. Thus, looking to invest over a short-term only when we think the market will go up creates a situation where you will usually experience substantial losses that will never be recovered because you will buy at high prices and sell at lower prices. If at the current time you simply do not have the risk tolerance to withstand the ups and downs for the long haul then there is nothing wrong with continuing to invest in the low risk guaranteed return, fixed income, low cost annuity, stable value, certificate of deposit like investments in your retirement plans and brokerage accounts. Just remember that your gains may not beat inflation over the long haul. However, you will still far outdo the vast majority of your peers who save and invest virtually nothing.
While our example of becoming millionaires over the past 25 years by putting approximately 75% of our investment money into no-load low-expense stock index mutual funds and the remaining 25% into bonds and fixed income investments give insight into the power of employing a simple long term investing pattern, you should speak with an advisor or use sound tools to determine your risk tolerance to decide how much stock (equity) investment you are comfortable with. At older ages, some people want a lower percentage of investment money affected by day-to-day swings in the stock market.
I know average wage earners who amassed hundreds of thousands of dollars by investing in certificates of deposits and fixed income investments over their 30-35 year working lives and who continue to invest that way in retirement and they're doing well. If there not living like kings in their senior years (when they need comfort the most), they're certainly living like princes (smile). The most important biblical money management principles you can follow are living beneath your take home pay, tithing, eliminating debt to live debt-free as soon as possible, not co-signing, and regularly saving 10% and increasingly greater amounts over the course of your working life so that you can receive the exponential benefit of compounding interest.
While we believe investing in stocks over the long haul will provide greater asset accumulation and greater opportunities for giving and comfort in your senior years, before you do so you should educate yourself about such investments and make sure that you feel comfortable investing in such vehicles regardless of what we or anyone else might advise. Until you are educated and comfortable with the risk you would be taking, let your savings in guaranteed and fixed income vehicles be your investments. Saving and investing is an example of a principle having reasonable parameters within which you should operate in order to be blessed and rewarded.
Please pray for this ministry and email me with any questions. May the LORD bless you richly as you follow His plan!
Proverbs 13:23, Proverbs 21:20, Proverbs 22:7, 1Timothy 6:17-19
Please forward these bondage-breaking articles to other people who can use helpful insight!
You can find books authored by Randy Parlor and Karen Parlor at www.Amazon.com
You can find many other MoneyWalk articles on Facebook by looking at the NOTES created by Randy Parlor at https://www.facebook.com/#!/profile.php?id=100000444069041&sk=notes.
You can connect with Randy Parlor on Twitter and Linkedin
You can also view and/or listen to MoneyWalk articles at https://www.youtube.com/channel/UCXnztOIesOKIrSd_H6c-8mQ
No comments:
Post a Comment