4 Wisdom-Focused Basics for Every Investor

The Bible provides us with four primary guidelines for investing.

How many times have you heard of people losing their life’s savings on a get-rich-quick scheme? Sadly, it seems that Christians are particularly vulnerable because they trust others who appear to live by their same values. The strategy for avoiding risky investments is to pray, seek wise counsel from your spouse and others, and do your homework.

Every investment has costs: financial, time, effort, and sometimes even emotional stress. For example, a rental house will require time and effort to rent and maintain. If the tenant is irresponsible, you may have to try to collect rent from someone who doesn’t want to pay—talk about emotions! Before you decide on any investment, consider all the costs.

Now, let’s apply those four investing principles.

When deciding where to invest, you need to consider your goals, timeframe and tolerance to risk. The concept of risk is important because, as the “Time & Risk” diagram shows, investments with the best track record also carry the greatest potential for loss—at least in the short run.

In other words, the more time you have, the more you can afford to invest in stocks, mutual funds or real estate—all investments that can lose value in the short term but historically offer the best opportunity over the long term. If you have ten or twenty years before you need the money, you can probably recover from most market downturns, but if you need it in less than five, alter your approach.

This means using different investments for different goals. An investment that is suitable for a fifteen-year goal is simply not appropriate for money you will need in two years. If you need the down payment to buy your home in two years as opposed to funding your retirement in fifteen years, you will invest the money differently. Move your money into more conservative investments as you get closer to the time you will need to spend it.

With that in mind, here are strategies to consider over the short (less than five years) and long (more than five years) term.

Remember, the name of the game is to be a *steady plodder—*consistently add to your investments and allow them to compound.

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