11 Biblical Principles for Investing

As you may have noticed, the market has had a rough start to the year…very rough.  

In fact, the S&P 500 just wrapped up the worst January-June performance since 1970!  The media is full of all kinds of headlines, including (but not limited to):

“The market is in the tank.  You better sell everything before it gets worse!”

“The market is in the tank.  You better buy now while it’s on discount!”

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With such conflicting views in today’s marketplace, it can be confusing to know where to turn and what to do with your portfolio.  When we advise our clients, we strive to do so with God’s money management principles in mind.  Not surprisingly, the Bible provides lessons for us when we create our investment strategy as well.  So, what does the Bible say about investing – especially in a bear market?

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Let’s begin by reviewing the worldly perspective on investing.  

One of the main perspectives we commonly hear is that of “get rich quick.”  Unfortunately, there is no free lunch and “get rich quick” schemes can often be incredibly dangerous and risky.  This mindset is congruent with having a very short-term time frame in mind, which is consistent with our society’s way of thinking.  Our society also encourages us to spend and consume first, as opposed to saving and investing first.  Our financial news also often repeats the phrase “buy low, sell high” as if it’s that easy.  As you can see, all of these worldly perspectives go hand-in-hand.  If we have a short-term time frame, or we are impatient as we work through a financial plan, it’s easy to see how we can make poor decisions that are driven by emotion.

The Bible, on the other hand, lays out a very different set of principles:

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1. Save and invest first.

This is clearly in direct conflict with the worldly perspective mentioned above.

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2. Focus on preservation and steady growth of capital.

Proverbs 28:20 tells us, “A faithful man will abound with blessings, but he who hastens to be rich will not go unpunished.” When investing, we want to focus on implementing the right principles for a long period of time.

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3. Plan for long-term time horizon.

It’s very easy to get caught up in short-term fluctuations of the market, and this is one of the biggest areas in which people make mistakes.  It’s much more prudent to focus on a long-term time frame to help us make investment decisions.

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4. Time is a tool.

When investing, time can be your friend or your enemy.  The earlier you start, the better off you are.

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5. Cycles are inevitable.

Down markets happen, and there’s nothing we can do about it.  We can look back over the history of the stock market and see that bear markets have statistically occurred a couple of times per decade (on average).  The key is to focus on the long-run (as stated above) and maintain the proper risk level throughout those down markets.  Focusing on allocation can help us to see beyond the emotional pain of a down market.

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6. Have a diversification strategy.

It can be incredibly tempting to go all-in on the “next big thing.”  Unfortunately, knowing the “next big thing” is not possible.  The Bible makes it very clear that diversification is important and not to have too many eggs in one basket.

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7. Seek wise counsel.

Proverbs 19:20-21 tells us, “Listen to counsel and receive instruction, that you may be wise in your latter days.  There are many plans in a man’s heart, nevertheless the Lord’s counsel – that will stand.” It can be very easy to make poor, emotionally-charged decisions without an accountability partner.

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8. Avoid high leverage.

As we’ve reviewed previously, Proverbs 22:7 states, “The rich rules over the poor, and the borrower is servant to the lender.”

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9. Monitor your anxiety.

Down markets happen, and it can be easy to become anxious and worrisome.  We must safeguard ourselves from these feelings, however, because they can lead to poor decision-making.  Remember to submit these feelings to God through prayer and to focus on the long-term outlook.

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10. Establish limits on the amount you invest.

We’ll discuss this in more detail in a future blog post, but a financial finish line can be a key part to any Christian financial plan.  Remember the paradox of prosperity – the more we have, the more we have to worry about.

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11. Create spousal unity in decision making.

Being on the same page with one another is absolutely critical – it will lead to an enhanced peace-of-mind for each one of you.

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With all these principles in mind, what should we implement when in the midst of a down market?  First and foremost, we must remember to focus on a long-term perspective as opposed to the emotions of short-term fluctuations.  Second of all, it’s critical that we review our portfolio allocations to ensure that they still match up with our long-term goals.  In some cases, it can even make sense to use a down market as an opportunity (although that’s based on a variety of factors).  We’ll review this in our next blog post.  If you have questions regarding your portfolio allocation, don’t hesitate to contact our financial planning team.

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EXTRA: Stay up to date with the bear market by tuning into our weekly video updates on Facebook.