Spiritual Secret to Successful Money Management - Part 7 of 7: Diversify Your Assets

Money is strange. It disappears faster than it appears. As humorous, American poet, Ogden Nash, once said, “O, money, money, money, I’m not necessarily one of those who think thee holy, but I often stop to wonder how thou canst go out so fast when thou comest in so slowly.” It’s just plain hard to preserve wealth. Stock market “corrections,” inflation, and financial fees all destroy our wealth. What to do? Jesus tells us to “store our treasures in heaven.” I plan to deal with this in a future article, but what do we do with our vulnerable earthly treasures? Let’s take an indirect lesson from Abraham, whom God made “very rich in livestock, in silver and in gold,” Genesis 13:2. Note Abraham’s three categories of wealth: Livestock, silver, and gold. This is the first biblical mention of a diversified asset portfolio to safeguard earthly blessings. I see livestock representing dividend-paying stocks with growing dividends, plus the ability to reproduce via stock splits. Livestock falls within the asset sector of consumer staples, and might even be viewed as utilities/infrastructure. On the other end of this investment spectrum we have gold. It’s dead. It does nothing. It just sits there and looks pretty. Yet gold is internationally recognized as a primary store of value. It’s used as pavement in heaven, but on earth it will never lose all its value. Silver represents cash and highly-liquid, short-term bonds. Some of you may remember when silver was cash. Before 1967, Canadian dimes and quarters were mostly silver. It’s good to keep some of your portfolio as cash so that you can act fast. Why diversify your holdings? Ecclesiastes 11:2, as expressed in the God’s Word Translation, says it best. “Divide what you have into seven parts, or even into eight, because you don't know what disaster may happen on earth.”

The fact is, we don’t even know what a day might bring. Presuming upon the future is dangerous, but the Lord tells us all to read the signs of the times; to be alert and think about current trends and their implications. After eight years, the rising stock market has grown without a “correction.” It sounds like the financial markets need to get fixed, but a correction simply refers to a drop of at least 10%. A long-term correction may lead to a bear market or possibly a recession. By the way, the terms bear and bull markets refer to how these animals fight. The bears strike down with its large claws, while the bull thrusts up with its sharp horns. Despite being uncomfortable, corrections are actually healthy for the markets. They are buying opportunities. Think, “A strong wind clears the forests of dead wood.” I believe we will see a “correction” soon, but I could be wrong. Why? Because, like any mere mortal, I don’t know the future. I prefer to stay diversified. Investing only in Air Canada and West Jet is not diversification. Some in the investment community say, “Cash is king.” Wrong. Christ is king. His word tells us to keep earthly treasures diversified.

True diversification across asset classes is becoming more difficult. Information is being shared across the globe faster and fuller, causing the financial markets to move in unison. It’s harder to find assets that are totally independent of each other. It requires analysis and a good understanding of finance and economics. Knowledge and hard work are the opposite of randomness, like in a lottery win, for those who “play” the odds and markets. Sadly, a spirit of gambling and speculation has polluted our financial thinking, as evidenced by government-sponsored casinos and lotteries. In reality, good financial results don’t just happen. Lasting prosperity is not a lucky win, but the result of much wise planning. Prudent investing is the same. That’s the message in the Scriptures, especially from the book of Proverbs Check out: Prudent Pauline.

Tom Lipp