Should a Christian Invest?
- Thursday, June 22, 2000
Investing requires the management of funds in order to generate a potential profit. Investing is a matter of stewardship.
Some Christians are confused about the concept of investing. They will dedicate their lives to investing, thinking that they can somehow buffer themselves from all adverse circumstances simply by having enough money.
Other Christians take an opposite view and believe that investing is a secular enterprise and Christians should have nothing to do with it. Both views are unbalanced and wrong.
Actually, God's Word has much to say about investing; and it's always for the purpose of helping to satisfy future needs, such as educating children or supplementing income in old age. These and many other needs are perfectly legitimate according to God's Word.
Investing in and of itself is not unscriptural; however, the attitude one has about the purpose for investing might be. And some types of investment may be more an issue of gambling than investing.
In The Complete Financial Guide for Young Couples, I point out that approximately one out of every 200 people who invest in the commodities market ever gets back any money. That doesn't mean that the person made a profit, only that he or she got some of the initial investment back.
Investing in commodities is probably the closest thing to gambling that most people ever try. They can lose everything they own and more. "Everyone who is hasty comes surely to poverty" (Proverbs 21:5).
In general, option contracts are pure speculation with the highest risk available. They might well be considered gambling, because you are "betting" on whether a stock will go up or down. You buy the stock on margin, meaning you put a small amount of money down on a large future purchase. Just as with commodity trading, if you were to guess right, the profits could be great, but if you guess wrong, you could lose everything you own and more.
Remember the caution of Proverbs that whoever hastens to get rich quickly will become poor even more quickly. I strongly advise against investing in this very high?risk area.
Rental property can be an attractive investment as part of a balanced investment portfolio-with certain cautions. You need to have adequate equity in the property, an ideal location, and enough cash flow in your own budget to make any additional payments during times when the property is not rented.
Even in a bad economy people need somewhere to live; but you also must calculate whether you would have enough cash flow to carry the mortgage on the property if rent goes down or the property is vacant for a month or two. The more equity you have in rental property, the more likely the value of the property will never drop below its loan balance, even if real estate values should plummet as they have done in the past.
Although rental housing may be one of the soundest areas of investing for the average family, it is perhaps the most difficult area, because it requires a lot of work. There are specific matters to consider.
- Look for residential housing in your area or in a good rental area.
- Be certain that you have enough equity in the property to avoid surety.
- Be convinced that your rental house is a "fair deal" for the renters and for you.
- Determine whether you are willing and able to do general maintenance yourself.
- Be sure your personality is conducive to being a landlord.
Individual retirement account (IRA)
My personal opinion about individual retirement accounts (IRAs) is that they are excellent tax shelters. IRAs have gained additional flexibility because many banks and other institutions now allow you to establish a self-directed IRA in which you determine where the money will be invested, at least within reasonable parameters.
In my opinion, the only real objection to IRAs is that they eventually might be used to feed more money into the Social Security system. Because IRAs are held in cash, or mostly cash accounts like Treasury bills, certificates of deposit, stocks and bonds, and other kinds of paper assets, they could be converted easily if and when the government needs money for the Social Security system.
If there is no other retirement plan available to you, such as a tax-sheltered annuity (TSA); a pension and profit-sharing plan; or self-employed retirement accounts, such as a Keogh or HR10, an IRA is a good alternative.
An IRA helps shelter income from taxes and the new Roth IRA allows your money to be withdrawn tax-free after the stipulated time. Thus IRAs are a good savings plan for you to consider and may be a good source of an eventual supplement to your Social Security income.
Many good money market funds have complete check-writing privileges. Money market funds are the pooled savings accounts of many people, used to purchase short-term securities, such as insured accounts, certificates of deposit, and so on. These are not true savings accounts but are short-term mutual funds that pay interest. The interest rates vary directly with the current interest rates.
Your choices in investing through a money market fund depend a great deal on the amount of money you have to invest. If you're considering an amount greater than $5,000, you should keep it in a money market fund that is insured with enough assets to back it-for example, in a large bank insured by the FDIC.
Although most money market funds are not insured against losses, your investments with a major company should be fine as long as you know the company is financially sound. Money market funds are available through most brokerage firms, savings and loan associations, and banks.
Sometimes someone may offer you an investment that is promised to make a lot of money in a short time. We probably cannot avoid all get-rich-quick schemes because Christians also get emotionally caught up in our desires (or greed) just as non-believers do. However, you need to "Trust in the Lord with all your heart and do not lean on your own understanding" (Proverbs 3:5). A great part of wisdom is recognizing your limitations.
Remember that investing requires the management of funds in order to generate a potential profit. That goes right along with biblical stewardship. "Let a man regard us in this manner, as servants of Christ and stewards of the mysteries of God. . . . It is required of stewards that one be found trustworthy" (1 Corinthians 4:1-2).
You will seldom be lured into a get-rich-quick scheme in your area of expertise. So an uncomplicated method to avoid such schemes is to stick with what you know. An almost foolproof way to avoid losing money in a get-rich-quick scheme is simply to stop and think.
There are some important principles to remember when considering any type of investment.
- Don't get involved with things you don't understand.
- Don't risk money you can't afford to lose.
- Don't make quick decisions.
- Guard against becoming involved with an investment just because a Christian offers it; that is not a guarantee against loss.
"Rest in the Lord and wait patiently for Him; do not fret because of him who prospers in his way, because of the man who carries out wicked schemes" (Psalm 37:7).
God holds us accountable for our stewardship. Not only is it bad stewardship to ignore sound investment strategy, it is also slothful. There must be a balance between investing, get-rich-quick transactions, and complacency. That balance is called responsible stewardship.
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