Should Christians invest their money? Absolutely! The parable of the talents in Matthew 25:14-30 suggests we are expected to invest. Those who choose not to invest or make the best use of the resources available to them will, like the servant who hid his talent in the ground, be cast into darkness.
But wait a minute, isn’t this parable about singing, or hammering a nail, or generally living our lives for God? Well, yes, the parable certainly can be applied (and often is) toward using our talents for God. But consider that a talent in the ancient world was literally a form of currency, roughly equivalent to 6,000 days’ wages. Consequently, each servant received, according to their abilities, 20, 40, and 100 years’ worth of earnings (we are talking millions of dollars here). Obviously, the master expected his money to be used wisely.
If we believe that everything we have comes from God (1 Chron. 29:11, 12; Ps. 24:1, 2), and that He wants His resources used to glorify Him (1 Cor. 10:31), it only makes sense that God expects His money managed in the best possible way (1 Tim. 6:17-19; Eph. 2:10; 2 Cor. 9:6-8; Eccl. 11:1, 2). We are called to invest for Him! This means putting His money to work, in partnership with Him, just as the servants in the parable did for their master.
Some belittle the thought of investing money because, perhaps, they equate it to gambling. But when we compare the two, we find investing and gambling are vastly different. Investing is putting money to work with the expectation of generating gains or profit over a long time. Gambling is taking a chance knowing full well you are more likely to lose what you put in, yet hoping for a quick, profitable outcome. The expectation of receiving something in return (a return on investment) distinguishes investing from gambling.
Functions of Money
Still not convinced of the importance of investing? Consider this: money essentially has three functions. It can provide for our immediate needs, be saved for the future, and/or be given away. We should strive for balance in all three functions. We should work to provide for our immediate needs and be satisfied when our needs are met. We should save for the future without hoarding our wealth. We should be generous without leaving ourselves destitute.
Investing can aid in two of these functions. First, it enhances savings by putting money to work while saving it (as opposed to letting it lie dormant while losing purchasing power because of inflation). Second, it generates more money that can be given away to bless others!
Foundation for Investing
Like the wise man who built his house upon the rock, we should ensure that our finances are on solid ground before investing. Start by seeking His guidance, prayerfully submitting to God’s will, and asking Him to guide you in all your financial decisions. Then make a budget you can live within. Finally, be debt-free as much as possible, and have some savings that can be accessed quickly for emergencies. A lot has been written about these basic financial necessities, so there is no need to go into more detail here. Suffice it to say that if you are living beyond your means, taking on debt, and have no emergency fund, then your first investment should be to get your financial house in order.
Principles for Investing
With a firm financial foundation in place, there are some universal principles to keep in mind as you start to invest.
- Have Value-driven Investments.
To truly use all our resources to glorify God, we must be mindful of where we invest our money. Typically, faith-based investing excludes companies considered immoral, such as tobacco, alcohol, gambling, and pornography—the so-called sin stocks. The General Conference of Seventh-day Adventists screens out these investments from its portfolio, and, praise the Lord, the rate of return is not adversely affected.
- Understand Your Investments.
There are many kinds of investments and just as many ways investments can make or lose money. Before investing in anything, understand the risk-to-reward ratio. Know how it can increase in value or make a profit, and know the costs involved (will they eat up all your gains?). Know what regulations govern this investment, and how they may protect you or leave you exposed. Never invest in anything you do not understand.
- Know Your Time Horizon.
Many people invest for their retirement, or their children’s education, or some other big purchase. Whatever your reason for investing, have a clear understanding of your time horizon. Are you retiring next week, or 50 years from now? Is your child off to college next year, or are they still in the cradle? However long you have, pick investments that fit within your time frame, and then stay the course. If you won’t retire for another 20 years, don’t get nervous and pull your money out because the investment has a bad day. There will be many ups and downs with such a long time horizon, so you should be prepared to weather several storms.
- Expect a Reasonable Rate of Return.
Investing is not a get-rich-quick scheme, so there should not be an expectation of doubling or tripling your investment overnight. An example of a reasonable rate of return is inflation plus 3 to 5 percent. Historically, this equates to a return of about 6.5 to 8.5 percent. A reasonable expectation enables you to keep an investment portfolio mix that outpaces inflation while avoiding unnecessary or speculative risks that could wipe out your investments.
- Every Investment Has Risk; Balance the Risk Accordingly.
There is no such thing as a risk-free investment. Even a federally insured savings account faces inflation risk. Sure, you may sleep well at night knowing that if the bank goes under, you will get your money back. However, you still face the real possibility of losing purchasing power because of inflation on a longtime horizon. Know the risks of your investment and make sure it aligns with your time horizon and the expected rate of return.
- Diversify Your Investments.
Just as it’s unwise to carry all your eggs to market in one basket, it is just as foolish to invest all your money in one company. By investing in multiple companies or, better yet, multiple sectors of the economy (such as energy, health care, information technology, and real estate), you can spread out your risk and recover more quickly if one company, or sector, has a bad year.
- Take Advantage of Compound Interest.
A Chinese proverb says, “The best time to plant a tree was 20 years ago; the second-best time is now.” While this proverb certainly applies to better homes and gardens, it also applies to investing because of the blessings of compound interest. For example, let’s say a 20-year-old invests $200 a month at an 8 percent rate of return, then stops making monthly contributions after 10 years. Their total contributions equal $24,000; when they turn 65, they will have roughly $600,000. Now suppose that same individual waited to start investing $200 a month from age 30 to 65, gets the same 8 percent rate of return during that entire stretch, and total contributions equal $84,000. In that case, they will have only $460,000. The first scenario ended up with $140,000 more despite having contributed $60,000 less. The difference maker is time. When it comes to investing, the sooner you start, the better off you will be. But no matter how old you are, it’s not too late to start investing today.
By balancing the functions of money, having a firm financial foundation, and applying sound investment principles, we form a stronger partnership with God. Ellen White said, “You have nothing to fear; invest your means where it will be doing good; scatter rays of light to the darkest parts of the world…. Christ has given all for you; what will you give for Him? He asks your heart; give it to Him, it is His own. He asks your intellect; give it to Him, it is His own. He asks your money; give it to Him, it is His own.”* Let’s invest our finances for God as the wise servants did, and, in so doing, strengthen our relationship in Him from whom all blessings flow!