The Biblical Principles of Investing

The Word of God is THE authority on every subject of life. It should guide your natural life as well as your spiritual. In fact, even in investing the Bible lays out principles which can help you make better decisions. Too many people lose money by trying to catch a rising stock or chasing some get-rich-quick scheme instead of following the investing principles of the Bible.

It is important to note that investing by its very nature does involve taking some risk. And investing is not strictly limited to the stock market either. Some people invest in business ventures or start their own business. Others invest in real estate, commodities, currencies, etc. Regardless of your chosen investment vehicle, the Biblical principles of investing will apply to each.

It’s interesting that the Bible does advocate investing your money rather than just keeping it “under your mattress”.  Jesus criticized the servant who buried the single talent that was entrusted to him, while praising those servants that earned good returns on their investments (Luke 19).  It seems that learning to make good investment decisions is a key part of becoming a wise steward. 

So rather than just listening to what the investing guru’s on Wall Street have to say or reading the latest investing book, let’s look at some of the principles that the Bible lays out for investing:

Diversification

Cast thy bread upon the waters: for thou shalt find it after many days. Give a portion to seven, and also to eight; for thou knowest not what evil shall be upon the earth.  Ecc. 11:1-2

It’s never a good idea to invest all your money in a single venture. Living under the curse, no investment is a sure thing. Therefore, it is better to diversify your investments so that if one does poorly the losses you take on that investment will be offset by your gains on your other investments.

Invest in a business or product you understand

Through wisdom is an house builded; and by understanding it is established: And by knowledge shall the chambers be filled with all precious and pleasant riches. Prov. 24:3-4

Whether its choosing a stock to invest in or a business to start, choose one where you understand the products and how it makes money. In the late 1990’s, many people were investing in stocks without even knowing what they did or how they would ever be able to make money. As a result they had no way of understanding how the business itself was doing and recognizing when wheels were coming off the wagon.

Investing is not Speculating

Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase. Prov. 13:11

Any wealth you gain from gambling, whether it be in the stock market or at the casino soon will vanish. If you choose to invest your money without having any solid rationale for doing so, then you are not investing - you are speculating. Of course even speculators hit gold occasionally, but the odds are you will lose big following that strategy.

Don’t get greedy

Take heed, and beware of covetousness: for a man's life consisteth not in the abundance of the things which he possesseth. Luke 12:15

Investing can be a part of your life, but it should not be your life. If you live and breathe your money and everyone can tell how your portfolio is performing by your daily attitude swings, then you need to reassess your priorities. Money can be a defense and should be built up in preparation for the future, but obtaining wealth should never be your only purpose in life.

Patience

Rest in the LORD, and wait patiently for him: fret not thyself because of him who prospereth in his way. Psalms 37:7

Any wealth you accumulate should not be measured against what your friends have, but rather it should be recognized as what God has given to you. You should never brag about your investment returns nor be concerned with others who do brag. If you’re following the principles of the Bible, God will bless you on His own time schedule.

No overnight millionaires

Labour not to be rich: cease from thine own wisdom. Wilt thou set thine eyes upon that which is not? for riches certainly make themselves wings; they fly away as an eagle toward heaven. Prov. 23:4-5

There are many exotic investment vehicles that have been created because of the greediness of man. They offer a pathway to great riches in a short amount of time, but they also offer the chance for great poverty. You should never enter into any type of investment that could cause you to lose more than you originally invest. Investing via leverage or margin thinking you’re going to strike it rich quick is a sure way to end up losing much more than you originally bargained for.

Invest only what you can afford

There is a sore evil which I have seen under the sun, namely, riches kept for the owners thereof to their hurt. But those riches perish by evil travail: and he begetteth a son, and there is nothing in his hand. Ecc. 5:13-14

It’s very sad that so many of the people who buy lottery tickets can hardly afford to live from paycheck to paycheck. Money that should be used to provide for their family’s well-being is thrown away chasing dreams of great riches. Before you put money in any type of investment you should first be able to adequately provide for your families needs and even have some money set aside for emergencies in case you need it. Your investments are for your future, not for your emergencies.

Prepare for Economic downtimes

A prudent man foreseeth the evil, and hideth himself; but the simple pass on, and are punished. Prov. 27:12

Due to the curse, cycles of economic prosperity don’t continue forever.  It would be nice if they did, but unfortunately you must plan for when the economy, stock market, business environment, etc. turns south.  This is what made Joseph such a valuable steward to Pharaoh, he was able to create wealth in both the bull and the bear markets of Egypt.

The Bible provides guidance even on how to execute your investment strategy.  While the investment principles of the Bible are helpful, the desire for riches should never be the guiding principle of your life.  "Seek ye first the kingdom of God . . . and all these things shall be added unto you". (Matthew 6:33).