INVESTING GOD’S SURPLUS

Is God providing for your needs?  ☐ Yes, ☐ No, ☐ Maybe, ☐ Sometimes, ☐ Most of the time, ☐ Almost.  You know what we are talking about here when we say “needs”, don’t you?  Did you go to bed hungry last night (and I don’t mean are you on a diet?)?  Did you spend the day naked and will you spend the day naked tomorrow and thereafter?  Did you sleep under the stars last night (involuntarily)?  If you answered no to these last three questions, then God is keeping His promise to you.  Now let me ask, “Is God providing over and above your needs?”  You say you are having trouble making ends meet, but regardless of how you answered you need to take a look at your family cash flow (I’m no longer calling this a budget).  God is providing a SURPLUS for you (and your family).  Having looked at your cash flow you already know this, don’t you.  When you subtract the total of your NEEDS from your gross income you get a positive figure.

In case you are wondering what to do first with your (God’s) SURPLUS, the first thing is to begin saving it for an emergency.  When you have three months worth of necessary survival-level living expenses, then start paying off your unsecured debt (credit cards).  When you get your unsecured debt paid off, start following the four rules for successful use of credit cards.  Forget about bankruptcy…………….…. Ps 37:21 The wicked borrows and does not pay back, But the righteous is gracious and gives. NAS

When you get to this point you could start paying off your home mortgage faster and save some interest.  If it’s a 30 year mortgage you will save quite a bit of interest over this period.  However, you do have to live somewhere; the interest is deductible; you do build some equity, so I’m going to let the Holy Spirit speak to you about whether or not your mortgage is wise use of His money to accomplish His goals and objectives.  My only question is “Do you really NEED 6000 square feet and five bathrooms?”

Now we are ready to start investing God’s surplus and you have two choices: do it yourself or hire someone to do it for you.  Before you make this decision, read The Sound Mind Investing Handbook by Austin Pryor.  There are four basic factors you should consider in making this decision:

1. Time.  How much time do you have to devote to this responsibility and how much is your time worth?  Either way you go it will take some time.  I do it myself, and after an initial educational investment of time (the learning curve), it takes me 8-10 hours per month.  I’m going to stick my neck out and say that’s the most it should take anybody (after the initial investment of educational time).
2. Detail.  Are you detail oriented?  If not, you will hate doing it yourself, but you probably won’t be able to escape some detail even if you hire someone.
3. Cost.  It will probably cost more to hire someone but doing it yourself isn’t free.
4. Smart.  Are you smart enough to do it yourself?  Probably.  This isn’t rocket science.

Once you have made this initial decision, there are some basic issues associated with investing you should be aware of:

1. Risk and return.  When we enter the world of investing we are hoping to earn a greater return than our emergency fund earns in a savings account or even money market account at the bank (or credit union).  Notice that I use the term “hoping”.  When we step beyond the safety of FDIC (Federal Deposit Insurance Corporation) we assume a degree of risk.  We will be lending money (the bond market) to a government/company/corporation/organization/etc. that may not be able to pay it back much less with interest.  Or we will be taking ownership (the stock market) of part of a company/corporation/organization, etc. and it may fail.  The greater the likelihood of loss/failure, the greater the degree of risk associated with any one investment, and the more that must be paid or promised in the way of return to attract God’s surplus for investment.  When you start reading on this subject you will eventually run across a chart that shows CDs at the lowest level of risk, then money market funds, then bonds, then stocks, then real estate, then collectibles, then options, and at the highest level of risk (usually) commodity futures.
2. Diversification.  Never invest God’s surplus in only one opportunity.  Spread the risk among several opportunities.  Don’t put more than 5-10 percent of the total surplus in any one company or fund.  Eccl 11:2 Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth. NAS  In 1924 this problem was partially solved by the creation of the mutual fund industry.  A mutual fund is simply a company that hires a professional manager to pool the money of many individuals and invest the funds according to specific guidelines.  Mutual funds usually own around 100 different stocks and/or bonds at a time.  This is a great idea because it spreads the risk of loss so that poor performance of one or two companies doesn’t adversely affect the performance of the entire fund.  You still have to be careful, however, because many funds specialize in particular market segments or industries or geographic regions, etc.
3. Asset Allocation.  Deciding how much to invest via ownership versus lending is called asset allocation.  How much you should invest in stocks versus bonds depends primarily on four factors:
   • Time Frame.  How old you are and how long you have to reach investment goals will determine the split between stocks and bonds.  If you have many years to reach your goals, you can afford to take greater risk associated with stocks or other risky investments.
   • Paranoia.  However, if you are nervous about taking risk, if you lose sleep thinking about and worrying about various investments, then you should be careful and invest in less risky opportunities such as bonds, or CDs, etc.  The trade off, of course, is a lower promised return.
   • Size of Surplus.  If it’s small and you can’t afford to lose it, don’t take very much, if any, risk.  If it’s large or you can set aside a specific portion that can be invested in opportunities with greater risk, then go ahead.
   • Need.  Maybe goals would be a better word here.  The larger your goal for investment of God’s surplus the greater the need for higher (promised) return.  The problem with this logic is that the greater the promise of return the greater the risk of LOSS.
4. The Market.  What is this thing they report on every evening on the news?  It’s usually the DOW (The Dow Jones Industrial Average) which is the average price of the stock of the 30 strongest companies in America.  They also report on the NASDAQ (National Association of Securities Dealers Automated Quotations System), an index of prices for stock traded over the counter.  Then there’s the S & P which is an abbreviation for Standard and Poor’s 500 Index.  It’s the weighted index of the value of the 500 largest companies traded on the NY Stock Exchange.  There are many other market indexes that measure activity.  Each one is associated with a particular segment of the overall stock market and tend to move in generally the same direction over a long period of time.  When stock prices are moving upward we refer to that as a “bull” market.  When they are moving downward, we refer to it as a “bear” market.  If you look at a chart of most any market index you will see that it cycles in some kind of rhythmic pattern.  When you see this pattern, you will say to yourself “this really going to be easy”.  All I have to do is buy into the market when prices “bottom out” and then sell everything when they reach the high point of the cycle.  You know the old saying, “buy low sell high”.  The only problem is that the chart shows the PAST HISTORY of prices.  What we want to know is how the chart will look like next week or next month or next year.  There is one person who knows of course but He isn’t telling. 

So, how do we decide which investment opportunities to take advantage of?  There are over 7500 stocks to choose from (at least those for which daily price quotations are available).  There are over 6000 mutual funds to choose from.  YIKES!!  On the positive side this circumstance provides employment for thousands (maybe millions) of people.  These people are all basically trying to guess what THE MARKET is going to do in the future.  If they are successful, the financial reward can be great.  Because this is such a huge industry, there is a great deal of information available for analysis.  There are several companies that do nothing but provide information.  There are a whole bunch of people and companies who are analyzing the information (financial planners, brokers, consultants, etc.).  These are the people you will hire if you don’t want to do this yourself.  However most all this information is available to you as well.  And you can purchase advice from some of these financial professionals without giving them God’s money to invest for you.  I subscribe to one of these newsletters that gives such advice, and it is much less expensive than turning over the investment job to someone else.

The bottom line, however, is RESULTS.  God wants results.  If you don’t believe that, take a look at this: Matt 25:14-30 “For it is just like a man about to go on a journey, who called his own slaves, and entrusted his possessions to them.  “And to one he gave five talents, to another, two, and to another, one, each according to his own ability; and he went on his journey.  “Immediately the one who had received the five talents went and traded with them, and gained five more talents.  “In the same manner the one who had received the two talents gained two more.  “But he who received the one talent went away and dug in the ground, and hid his master’s money.  “Now after a long time the master of those slaves came and settled accounts with them.  “And the one who had received the five talents came up and brought five more talents, saying, ‘Master, you entrusted five talents to me; see, I have gained five more talents.’  “His master said to him, ‘Well done, good and faithful slave; you were faithful with a few things, I will put you in charge of many things, enter into the joy of your master.’  “The one also who had received the two talents came up and said, ‘Master, you entrusted to me two talents; see, I have gained two more talents.’  “His master said to him, ‘Well done, good and faithful slave; you were faithful with a few things, I will put you in charge of many things; enter into the joy of your master.’  “And the one also who had received the one talent came up and said, ‘Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed. ‘And I was afraid, and went away and hid your talent in the ground; see, you have what is yours.’  “But his master answered and said to him, ‘You wicked, lazy slave, you knew that I reap where I did not sow, and gather where I scattered no seed. ‘Then you ought to have put my money in the bank, and on my arrival I would have received my money back with interest. ‘Therefore take away the talent from him, and give it to the one who has the ten talents.’  “For to everyone who has shall more be given, and he shall have an abundance; but from the one who does not have, even what he does have shall be taken away.  “And cast out the worthless slave into the outer darkness; in that place there shall be weeping and gnashing of teeth.  NAS

All financial professionals have some kind of system, method, approach, model, philosophy, etc. they employ to determine what the market will do in the future and thus how we should invest God’s surplus.  They sincerely want to do their best and of course we want them to do their best.  God demands it.  As I have read and studied I have come to the conclusion that these different methods/philosophies tend to fall into one of three groups:

1. Long Term Investors.  This philosophy says choose an opportunity that has had a long history of success and stick with it for the long haul.  Sure there will be ups and downs but over many, many, many years you (God) will be rewarded.  There are lots of data and information available to assist you in locating these opportunities.
2. Market Timers.  These are people who through their analysis of the market believe they can pick the low and high points in market cycles.  The advent of the affordable personal computer sparked a phenomenal increase in the number of people involved in this activity.  Most of these people have developed very sophisticated computer programs or models to make such predictions.  In spite of all the computer power employed in this technique, not very many people are good at this.
3. Short Term Investing.  These are people who look for opportunities that are performing well right now, during the last several months.  They invest in these hot current performers and stay with them until their performance starts to slip and then sell and choose another and so on.

All of these methods work sometimes and sometimes not.  The reason I want you to consider doing this yourself is that only about 15% of the financial “professionals” in the investment business “beat the market”, that is, they choose investment opportunities that produce returns/profits better than the market as a whole.  Only 15% BEAT THE MARKET, and anybody can achieve results that exactly match the market exactly.  Most mutual fund families have at least one market index fund that performs exactly the same as the market it tracks.  By investing in these index funds, you will do at least as well as or better than 85% of investment professionals.  That’s no consolation, of course, in a bear market.

Finally, there are two things you should be careful of when investing God’s surplus:

1. Opportunities too good to be true.  You know the old saying.  If it sounds too good to be true, it probably is.  When someone offers outrageously high rates of return for your investment dollars be ready to ask some questions and don’t stop asking questions until you understand how these high returns are achieved.  Ask another brother.  Pray about it.  Think about.  Discuss it with your spouse.  Do your homework.  Consider the risk.  Prov 13:10 Through presumption comes nothing but strife, But with those who receive counsel is wisdom. NAS
2. Emotion.  Don’t listen to all the hype.  Do your homework.  Develop a plan and follow it.  Every magazine, radio program, TV program, etc. has chosen the ten best stocks or funds for the year ahead.  Interestingly, they usually aren’t the same ones, and next month they may be ten different ones.