Apply Financial Wisdom To Your Investment
Perhaps the best investor the world has ever known was King Solomon. The Queen of Sheba noted that everything his hands touched prospered. So it would seem logical that if you could glean some investment advice from him , you should be able to improve your percentages, too. Fortunately, Solomon talked a great deal about his financial philosophies, as well as many other areas of life.
The Lord told Solomon that He would endow him with riches, honor and wisdom. Over the centuries he has been noted as the wisest man who ever lived. (You can read about Solomon in the books of Ecclesiastes and Proverbs.)
Investment Principle #1: DIVERSIFICATION
Solomon wrote, Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the Earth (Ecclesiates 11:2).
Divide your wealth (investment capital) into several parts and don’t risk it all in one place. Diversification is essential regardless of your age, income level, time frame, or personality. As your savings grow, your diversity should grow, too. Diversification does not guarantee success, but it does reduce the risks. Invest in different types of investments: bonds, domestic and foreign stocks, real estate. Mutual funds offer a high degree of diversification within a single fund. Even there, invest in different types of funds: small-, mid-, and large-cap funds, emerging markets, growth and income, etc.
Investment Principle #2: ETHICAL INVESTING
Solomon advised, The conclusion, when all has been heard, is: fear God and keep His commandments, because this applies to every person (Ecclesiastes 12:13).
This is good advice for anyone, but it is essential for Christians. Ask yourself, is what I am about to do going to be pleasing to the Lord? If not, stay away from it – no matter what the potential profit.
There are investments that can yield high rates of return with little or no risk. The difficulty is that they prey off the weaknesses of others. Christians need to consider investing in any company or mutual fund that would be deemed socially unethical. This is difficult to implement, especially with mutual funds since your investment is only a fractional percentage of ownership. A newsletter called The Social Investment Forum tracks mutual fund companies that strive to adhere to Judeo-Christian values on a regular basis. You can also check Sound Mind Investing newsletter. Perhaps a more effective way of showing your disapproval is to boycott the product instead.
Investment Principle #3: GOOD COUNSEL
This is essential to good planning. Without consultation, plans are frustrated, but with many counselors they succeed (Proverbs 15:22). Get good recommendations on investment advisers and financial planners. (Often Christians will not give an honest appraisal of someone’s abilities, not wanting to give a bad report about anyone. This is dishonest.) Always use more than one adviser, including your spouse. Tell them to be honest with you as they would want you to be if the roles were reversed.