A blog thread on www.catholic.com started with the statement, “I simply cannot understand the stock market headlines.” Most of the response posts have done little to bring clarity to the matter.
Throughout my working career it seems there has never been clear-cut reporting on the economy and investing. Very smart people who dedicate their lives to studying the markets often disagree with each other. What’s more, empirical data suggests that when a consensus forms favoring a certain outcome, that majority opinion is almost always wrong.
Who Should We Follow?
We all need to make decisions about our future. It would be foolish to ignore the need to build resources to provide for our future economic needs. We want to base our decisions on the best data we can possibly obtain. And who better to obtain that information from than experts?
The trouble is that those experts are interpreting historical data trying to divine meaning for the future. Is it possible that that exposes us to a form of sorcery? Sorcery is listed alongside acts like murder, fornication and idolatry. It is akin to divination and soothsaying. Bible passages in Galatians 5, Deuteronomy 18 and Revelations 18, 21 and 22 tell us clearly that there is no room for any of this in God’s kingdom.
So, What Do We Do?
Still, we are faced with having to make investment decisions as prudently as we can for the benefit of our families. Difficult at any time, recent stock market volatility is paralyzing, and historically low interest rates, rendering so called safe alternatives like CDs so unattractive, only exacerbate the process.
Prudent investment decision making follows fundamental rules which have proven true over many decades of various economic cycles. First among all investing rules is that of diversifying.
Diversification answers the most basic questions of how much of a portfolio should be allocated to the stock market? To bonds? To real estate and gold? And how much cash balance should be maintained? The asset allocation process can go deeper and get more complicated. But it is important to strike a balance between the effort and energy it takes to make these decisions versus the added benefit that drilling into the minutia may add to the portfolio returns.
To keep the process simple, I recommend following the most fundamental of all financial truths. That is to follow God’s law for investing and managing personal finances. It is so simple, it is profound. It is this:
Tithe 10% Save 10% Live on 80%
What Was That?
As simple as it is to state this rule, it is hard to implement. But I know from experience, and from the experience of many clients and friends, that following this rule leads to a sense of peace. Peace that comes from doing good for the community with your tithe. Peace that comes from providing for your family’s future. Peace beyond understanding that comes only from following God’s laws.
God’s peace to you.