The parable of the talents found in Matthew 25:14-30 can be distilled down to three very practical lessons:
- Recognize what talents (gifts and resources) God has entrusted to your stewardship.
- Be like the servants who increased their talents.
- Don’t be like the servant who buried his talent.
We are usually quick to recognize the spiritual application of this story. Our natural abilities, our mental powers, our influence, and all our innate and acquired talents should be developed for the service of the Lord. We apply the talents to everything under the sun from our musical abilities to our mathematical prowess (and rightly so), yet neglect the very thing that was literally employed by Christ in His parable: money.
This may be due to the tension that many believers feel about wealth, as we discussed in the first part of this series. But notice what Ellen White says in Counsels on Stewardship, page 133 (emphasis added):
The followers of Christ are not to despise wealth; they are to look upon wealth as the Lord’s entrusted talent.
If the symbol of talents in the parable actually includes the finances entrusted to our stewardship by God, then should we not heed Christ’s admonition in Matthew 25:27?
Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest.
Should we not be looking to increase the literal talents along with all of the spiritual ones?
The Motives for Investing
Let me be clear that investing for the believer shouldn’t be about getting rich or hoarding. As we discussed in part one, money is a tool that is good for only three things, and investing can help with two of them:
- Saving for future needs
- Increasing our giving to the Lord’s work
Investing must have an objective in mind. That’s what the long and short-term savings plans are for, to help keep that concrete objective in focus.
For example, investing can help us save up adequately for a dignified retirement, but it shouldn’t simply be to have the largest estate when we die. Investing can help us save up for our children’s college education, but it shouldn’t be to enrich them so they never have to learn to work. The point is to make adequate, defined provision for the future, not to have endless amounts of wealth.
The Spirit of Prophecy confirms this:
Had you and your wife understood it to be a duty that God enjoined upon you, to deny your taste and your desires, and make provision for the future, instead of living merely for the present, you could now have had a competency, and your family have had the comforts of life. (Ellen White, Counsels on Stewardship, p. 250, emphasis added)
What if our investments reach the point where all our needs are met (the Bible’s definition of “prosperity”)? What do we do with the rest of the money?
God instructs us exactly what to do:
Brethren, awake from your life of selfishness, and act like consistent Christians. The Lord requires you to economize your means and let every dollar not needed for your comfort flow into the treasury. (Ellen White, Testimonies for the Church, Vol. 5, p. 156, emphasis added)
Although we should invest, as stewards entrusted with the Master’s talents, let us be mindful that we are investing for His interests and not simply our own.
7 Principles on Investing
It is impossible to provide a comprehensive treatment of investing in this article, but here’s a summary of 7 foundational principles of investing, with links to other articles where I address some of these points in more detail.
- Take advantage of compound interest by making time your ally.
Perhaps the single best piece of investment advice anyone can be given is to start as early as possible. The reason is that the power of compound interest works better the more time it has.
For example, if a 20 year-old individual invests $2,000 a year for 10 years at an 8% rate of return, then never invests another dime, when she turns 65 she will have $500,000. Whereas if that same individual starts investing $2,000 a year from age 30 to 65, and gets the same 8% rate of return during that entire stretch, she will only have $380,000. In the first scenario, this person invested a total of $20,000 and still came out ahead of the second, who invested a total of $70,000. The variable that made the difference was time, which is why I liken it to being the secret ingredient to investing.
The best time to plant a tree was 20 years ago. The second best time is now. – Chinese Proverb
- Never invest in something you don’t understand.
Perhaps the second best piece of investment advice is to never invest in something you don’t understand.
Do you ever get random emails promising you a once-in-a-lifetime investment opportunity? How about a hot stock tip from your coworker at the water cooler? Ever heard of the Ponzi schemes that left investors “holding the bag?”
In each of these circumstances, it’s possible to avoid being duped simply by making sure you understand what you are investing in. Here are a few basic questions to ask:
- How does it make money?
- How can it lose money?
- What are the costs? (Fees, commissions, taxes, etc.)
- What are the rules/regulations?
The problem is that often our selfish nature is too strong, and we would rather throw rational thinking to the wind for a chance at great riches. Which leads us to the next point.
- Don’t be greedy. Don’t speculate. Don’t try to get rich quick.
Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. (Proverbs 13:11 ESV)
A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished. (Proverbs 28:20 ESV)
The Bible is clear; trying to get rich quick isn’t Christ’s way. But unfortunately, much of the activity termed “investing” is actually “speculation.” So how do we tell the difference? This table may help differentiate the two:
|Hoping for quick riches||Patient and steady for the long-term|
|Motive is to get rich||Motive is to meet needs|
|Based on arbitrary price movement||Based on expected productivity of underlying asset|
|Asks: “What is the price?”||Asks: “What is the value?”|
For example, if someone buys a stock because he thinks that the price is going to shoot up very soon, and consequently is constantly checking the stock ticker, that person is likely speculating. Whereas if someone buys stock in a reputable company from the perspective that he is buying ownership into a strong business that will have increased earnings going forward, and could care less what’s happening on the stock market, he’s more likely to be an investor.
- Understand how much time an investment requires.
The purpose of investing is to have our money work for us to generate more money, not for us to spend even more time working for our money.
Many things that are termed “investments” probably would better be called “side jobs.” Launching a new business is an “investment,” but the amount of time it will require to start and run the business makes it a second job. Being a landlord and managing all the headaches of renters can be viewed similarly. Even for day-traders in the financial markets, with the set hours they need to be glued to their computer screens, along with the analysis and research they have to do, makes it an active hobby at minimum or a full second job at most.
All investments are going to require some time and attention, but it is important to balance the time the investments require with the amount of time that you are able to devote to it.
- Understand your risk.
All investments have risk. Anyone who tells you otherwise is either ignorant or trying to swindle you. There is also a proportional relationship between risk and returns. The higher the expected returns on an investment, correspondingly the risk will likely also be higher. However, the inverse isn’t always true. Just because something is risky, it doesn’t necessarily mean it will bring higher returns.
Risk, simply defined, is the possibility of losing money. As the investor, our responsibility is to understand the risk and manage it appropriately.
Typically, FDIC-insured accounts like savings accounts and certificates of deposits are considered “low-risk” investments, because your chances of losing that money are close to none. However, correspondingly, the returns on those accounts are also close to none. Whereas investments in the stock market, like many mutual funds, have a much higher rate of return (many have averaged 8% or more over long periods), there is a much higher risk of losing money at any given time.
However, the reality of inflation affects the view on investment risk. As inflation increases over time, the purchasing power of a dollar decreases. This means that money held in a low-yield, low-risk account actually loses value over time even though the dollar amount may not decrease. On the other hand, higher risk, higher return investments like mutual funds have at least kept pace or exceeded inflation. It is due to these realities that we should keep our short-term savings in low-risk accounts even if the yield is low while we need to invest in higher yielding accounts for our long-term savings.
Beyond these technicalities, we also need to recognize our personal risk tolerance when we invest. Factors that contribute to that include our time horizon for when we need the money, our natural appetite for, or an averseness to, risk, and what our target amount needs to be. Many investment firms have surveys and calculators to help you assess your level of risk tolerance.
A wise man once said, “Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.” (Ecclesiastes 11:2 ESV); to put it in modern vernacular, “Don’t put all your eggs in one basket.”
It is wise advice to heed in our investments as well.
It’s never a good idea to place all of our investments in one asset, or even one type of asset. One or two calamities can easily wipe them out. Instead, it is always a good idea to spread out our investments across different asset types, so as not to lose everything if a few things go wrong.
This is the concept we are employing when we split up our short-term and long-term savings into different types of investments. For many people, the largest investment they have is in their home, so diversifying away into other things like stocks and bonds can help preserve their wealth in the event of a disaster that strikes their house.
Mutual funds are a type of investment vehicle that has diversification built-in by design. Consequently, they are one of the most common investment options offered in employer-provided retirement plans. They are collections of assets purchased and managed by professionals that individual investors can buy into by pooling their money together with other investors. Most mutual funds own stocks, but there are funds that hold bonds, commodities, precious metals, real estate, and other asset types.
- Stay the course, but have an exit strategy.
Investing is for the long haul, and so it’s important to stay the course. Often human emotions, whether greed or fear, get the best of us and cause us to do things impulsively when perhaps the best thing is to do nothing. Once you’ve developed an investment strategy, stick with it!
However, as Adventists, we understand that at some point in the Great Controversy, business will no longer be as usual—a period in salvation history called “The Time of Trouble.” The following quotation is a sober warning in relation to this time period:
Houses and lands will be of no use to the saints in the time of trouble, for they will then have to flee before infuriated mobs, and at that time their possessions cannot be disposed of to advance the cause of present truth. I was shown that it is the will of God that the saints should cut loose from every encumbrance before the time of trouble comes, and make a covenant with God through sacrifice. If they have their property on the altar, and earnestly inquire of God for duty, He will teach them when to dispose of these things. Then they will be free in the time of trouble, and have no clogs to weigh them down. (Counsels on Stewardship, p. 59, emphasis added)
It is clear that there will be a time when we are to offload all of our assets, and so our investment plan should have an exit strategy for when that time comes. However, we find these words in the very next page:
I also saw that God had not required all of His people to dispose of their property at the same time, but if they desired to be taught, He would teach them, in a time of need, when to sell and how much to sell. Some have been required to dispose of their property in times past to sustain the advent cause, while others have been permitted to keep theirs until a time of need. Then, as the cause needs it, their duty is to sell. (Counsels on Stewardship, p. 60, emphasis added)
The Master is Returning
In the parable of the talents, the servants traded their talents for the express purpose of gaining as much as they possibly could to give back to the Master when He returned. Let us likewise be diligent in the trading of all our talents now while we await His coming, so that we can be like the faithful servants to return all of it—with interest—to Him when He comes.
 All Bible passages are from the English Standard Version.