Grow
"Ship your grain across the sea; after many days you may receive a return. Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land." (Ecclesiastes 11:1-2).
This time we will change gears - to looking at how to successfully manage and grow what you have after your household has achieved a level of freedom from debt
. To be clear, if you still have debt outside of your mortgage (or perhaps any debt including your mortgage), investing long term should only be done within a 401K where your employer is matching your contribution - because you cannot get a greater guaranteed return. Persons trying to invest while carrying debt have a "hole in their bucket", because they may make some return on their investment, but the certain drain of interest charges from consumer debt will overcome that return.
Referring back to the scripture above, encouraging us to be diversified, we live in a advantageous time, where it is easy to have investment diversification. Mutual funds can be a good vehicle, however I will focus on one method that has proven very well - index funds.
Briefly, index funds buy and sell stocks from a segment of the market, or even the entire market - the S&P 500 companies, the 30 Dow Jones companies, and the Russell 2000 are a few examples. The two best reasons why these indexes perform consistently well is summed up in (1) very few professional investors outperform the market, and (2) indexes are a low-cost way to invest, because their fees are minimal, allowing more of your returns to grow.
Over the past 15 years, a study showed nearly 90% of actively managed investment funds failed to beat the market. Meanwhile, a 30-year return of indexes shows the following:
S&P 500 gained 10.7% Dow Jones gained 10.99% Russell 2000 gained 9.29%
In addition to the cost savings from small management fees, index funds offer a tax advantage. Since very few stocks are sold during the year, the fund generates fewer capital gains than an actively managed fund would.
Some people try to "play" the stock market, seeking an extravagant return, however I would point the way to Proverbs 13:11 that says "Wealth hastily gotten will dwindle, but those who gather little by little will increase it." Choosing index funds provides you with a reliable low-cost method to diversification and a confidence that you will never underperform the market.
The most important aspect in this is to monitor your heart regarding money, as it is written in Ecclesiastes 5:10 - "Whoever loves money never has enough; whoever loves wealth is never satisfied with their income. This too is meaningless."
Lastly, consider the ultimate investment you can make, converting earthly dollars into heavenly dollars... treasures in heaven. Jesus said in Matthew 6:20 for us to "Gather and heap up and store for yourselves treasures in heaven, where neither moth nor rust nor worm consume and destroy, and where thieves do not break through and steal."
God Bless you and may He show Himself greatly to you,
Paul
