MoneyWalk 163: Greater Return
This program will help you undo financial bondage.
Saving is generally considered money put away in vehicles that guarantee principal preservation and that usually earn less than annual inflationary cost increases. It is usually recommended that one save to cover emergency expenses and those that one plans to engage within a short period of time (less than five years) for things like roof repairs, furnace repairs, hospital emergencies, etc.
Investing is usually considered putting money in a vehicle that does not guarantee principal protection and that has historically shown great potential for well above average returns on one’s money. Usually, it is recommended only for money one will maintain for a long period of time (more than five years). These funds would normally be used for things like building retirement savings that substantially accumulate to allow you to eventually withdraw enough monthly income to live on, funding a business or ministry dream that will take years to finally engage, saving for a child’s college tuition, etc.
The person who invests should understand he will not earn periodic interest and that the value of the investment at any given time (whether increased or decreased from the time he bought it) is subject to supply and demand for that investment. Also, he may lose principle (especially during short-term economic corrections) and should be willing to take that risk believing he will instead experience greater growth in value during the time he holds the investment (especially the longer he maintains it).
Investing should usually be done after you have been disciplined to use good money management practices like consistently (a) earning an income, (b) adhering to a budget that keeps your monthly expenses below 70% of your take home pay, (c) giving money for ministry that leads people to Jesus Christ and makes them into disciples, (d) saving at least $10,000 as an emergency reserve account, (e) engaging a process to eliminate all your non-mortgage debt, and (f) refusing to co-sign on other people’s loans.
Because most of us are not market experts and stock picking gurus, we should utilize a process called dollar cost averaging whereby we automatically buy on a monthly basis a certain dollar amount of diversified investments with solid historical track records from a brokerage house like Vanguard or through our employer’s deferred compensation plan (401k, 457, 403b, etc.). This helps us exercise the buy low, sell high principle that leads to investment success and wealth building. Those who do otherwise are trying to time the market and are usually doing so without proper investment education. The vast majority suffer extreme losses over time and never wind up building the wealth they envisioned and hastily ran after.
When investing, past results are no guarantee of future returns. However, you should have greater comfort being invested after your financial stewardship is put in order. Investments will put you in a much better financial position down the road and help you overcome inflationary pressures that might otherwise diminish the purchasing power of your funds.
Here are a few helpful guidelines you can use when the time comes for you to add investing to your good stewardship repertoire:
· Review the prospectus for each investment to examine its one-year, five-year, and ten-year investment returns. Make sure they meet or exceed benchmark returns for that type of investment.
· Start with no-load mutual funds as a foundation for your portfolio until you are very knowledgeable about and skilled in capturing growth in the value of other types of investments (individual stocks, real estate, futures, oil & gas leases, etc.).
· Identify each investment’s expense ratio (the yearly cost you must pay to own it). Stay away from any with a cost that is not well under one-percent of assets under management.
· Over time, make sure no more than 10% of your investment dollars are put into any one investment. Diversification into a least seven or eight different savings and investment accounts is best as it provides a good degree of safety of your funds.
Many mutual funds will have an electronic funds transfer provision that will allow you to immediately start investing in them by giving the brokerage house authorization to electronically transfer as little as $50 per month out of your savings or checking account that it will use to purchase shares of the mutual fund(s) you want. Employer plans let you do this via payroll deduction without imposing a minimum amount per deposit.
The electronic funds transfer option allows you to avoid the minimum start-up investment (normally $1,000 or more) that many funds require for people who send checks to the investment firm. If you can't or don't wish to use an electronic funds transfer option, it is still worth your while to save the amount of money needed to meet the required minimum investment for the fund you want to invest in.
Long-term investing is a great wealth building tool that will enhance your life and ministry. It also helps you better gain increased monetary value that can be used to abundantly give in the future in ways that enhance the lives of many others.
Proverbs 6:6-11, Ecclesiastes 11:1-6, Matthew 25:14-30, Luke 19:12-27, 1Timothy 6:17-19
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The book at the link below provides principles and practical steps that help you use the Power To Get Wealth. By 1992, we had $135,000 of debt and a negative $35,000 net worth. Financial bondage and turmoil led me to seek principles and a process for employing good stewardship. As a result, we became constructively debt-free in 1998, mortgage free January 2004, millionaires in 2012, multi-millionaires shortly thereafter, and retired in 2018 in my mid-fifties from public servant jobs while giving abundantly to fund the gospel of our LORD Jesus Christ. The same power is available to you!
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