Investing in Babylon: What we do know

In biblical times, it was not a given that people would have excess moneys to invest. The cultures to which various “investment” advice were written in Scripture were often nomadic, poor, and war-torn, and obviously pre-modern. And yet, some form of financial instruction is provided throughout the Pentateuch, the Proverbs, the Gospel accounts, and the Pauline epistles.

Fast-forward to modern times, and while it is en vogue to focus on the realities of a slow-growth economy, more utility for the biblical wisdom of finance exists than ever before. Many people find themselves struggling to make ends meet, but that means something very different than it used to mean. Income levels and net worth statements of middle-class Americans—let alone those in the upper end or higher of what middle class is—have excess moneys. They seek the compounding of capital. The ability to generate a return on money is there for exponentially more people than it was for the biblical audiences who actually received firsthand instruction to invest, to invest wisely, and to be diligent in the process of stewarding and growing their capital.

Investing is the process of exposing your capital to some degree of risk for the purpose of receiving risk premium. Put differently, it is a return on capital that comes from some risk. The risk can be a prudent one, it can be a minor one, it can be a thoughtful one, and it can even be a risk that does not mean losing your money (liquidity risk and interest rate risk are two examples)—but the trade-off an investor pursues is between risk and desired reward.

Investing does not mean taking careless risks, or exposing your family’s financial health to severe loss of capital. The prehistoric financial system called for risk in order to generate return, and the highly modernized and sophisticated economy does the same. We know this as basic and self-evident facts. An investor may have a broad degree of circumstances that define his financial personality, objectives, and circumstances, but an investor who pursues a return of capital greater than the capital they invested takes certain risks to achieve that end.

In my 15 years of managing money for Christian clients, I have seen extraordinary confusion as to what an investing worldview ought to look like. Some believe investing is gambling, with wild and speculative swings of the bat amounting to a healthy pursuit of returns. Others believe that investing is equivalent to burying their money in the backyard—sometimes metaphorically, sometimes not. Their views equate wise stewardship with being driven by fear—usually deep-seeded sociological fears that lack grounding in reality.

What we do know about investing is that fear is not the guiding principle that drives a Christian, in finance or any other aspect of their lives. We know that calculated risks toward the pursuit of an investment return define investing, and we live in times where many of us have the capacity to do so.

My next column in this three-part series will talk about what we do not know in investing.