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5. Trading the Talents: Principles on Investing

Alistair Huong


Alistair Huong

Executive Director of AudioVerse



  • January 1, 2016
    8:45 AM
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This message was presented at the July see twenty fifteen come from Chosen. In the other resources like this visit us online at W W W G Y C web Father in heaven we're so thankful for a new day a new year. And Lord as we look forward to two thousand and sixteen. Above all. We wish for you to come soon. And as we discuss some of these principles. Lord May we ever keep that. And in mind. But maybe be faithful to your word and to apply the principles you give to us in even what may be the Mundine and regular ordinary aspects of life. Help us be faithful and teach us something today and guide us with your spirit we pray in Jesus name Amen. All right. Visitors. You can keep trickling in as we begin. So we're on such a number five here and the title of our session is trading the talents. Principles on investing so this entire segment. We're going to be looking at investing. And I mentioned this yesterday but when I was invited to do the seminar G Y C A one on Facebook and I was just saying hey. If you were going to a Christian. Personal finance seminar What would you like to hear about. There were things like getting out of debt. And then investing. How to do a budget. And then investing. How do you buy a car. And then investing. How do you start a business. Investing it was like every other person had a question about investing and actually after going through a few of the sessions yesterday. One of the number one. The number one question that I've been asked so far is. Is it possible to get eight percent returns on your investments because that happens to be one of the recurring themes in all of my examples for Compound interest in investing that I've used so we're going to talk a little bit about that as well. So this is the session if you've asked a question about a percent. You want to keep your ears open. So I MAKE THIS IS announcement every time my wife and I we write this blog. Saving the chrome dot com where we already go through most of the things I'm sharing with you here. Except you're getting something added value added value here and that is. We infuse. This presentation with all of the Spirit of Prophecy principles. Whereas on the blog. It is not specific to Adventists. It is a Christian blog. So I reserve my. Basis. Purely to Scripture and and other things. And I sprinkle in the spirit of prophecy. Principles. Without saying that it's spirit of prophecy. So if you read carefully. You'll see Ellen Y. speaking I just don't necessarily put it in quotes. So the principles are all there but here explicitly I give you. Passages. And the page numbers and all that. And so saving the crumbs dot com You can also get the handouts there on the the app I know it's a little hard to find but it's on there. Also you can download the handles later when they post them. Messages on the website. And they'll also be an audio verse. Eventually. And in the handout you get all the slides and you'll get the links to articles specific to what I'm talking about in each session. So it's a direct link to the things that relate to what we're discussing here so you want to get the handout. It will help you find what you might want to learn more about on our website so enough of that training the talents Well where does that phrase appear in the Bible. You remember the parable the Jesus told. Regarding the end times. Matthew chapter twenty five. About his servants. The servants who receive talents. And what would the servant supposed to do with the talents. Increase the talents and. One of the give people the one with one talent buried his talent in the earth. And this is what Jesus said to him. You ought to have invested my money with the bankers and am I coming I should receive what was my own with interest. And when we read. Cross object lessons. Ellen why breaks it down she applies. The talents to all sorts of things. Everything that's good that God gives to us our strength. Our speech. Our health our influence our time you remember reading that right. She also mentions that money. Happens to be one of the talents and money is actually the literal object. That is used in the parable. And so I think we would be misinterpreting or misapplying scripture if we actually say this applies to everything. Except them. Except money doesn't make sense why I'm saying. So the talents. Include all the gifts that God gives to us. And the wealth assets the material possessions it gives to us. Happens to be one of them. And of course as with all the talents. What's the purpose of increasing them. Is not our own personal aggrandizement or opulence or lavish life. It's for returning to the Lord. So that's the foundational principle it all belongs to God. Now we are his managers of his means. And we have an obligation to improve the assets that we have under our management and God's going to hold us accountable for the right use of all of our talents. And one of them being on the money that he's given to us. So spitter process makes this explicitly clear councils us to achieve page one thirteen paragraph one the followers of Christ are not to despise well. There's a look at home well as the Lord's and trusted. Talent. And we've read this quote before and again she says it is not for our own personal use. But we are to improve it for the advancement of the gospel. All right. So. The Bible does talk about investing. Now we need to understand better what the principles are. Because when we hear about investing in the world today. It's surrounded with almost this aura of greed and cover just in this is like when we talk about investing it's almost like well. How am I going to get filthy rich. Or how am I going to get a lot of money really fast. And a lot of times we sort of view investing as the sacred sauce or the silver bullet to solve all of our other financial problems. It's like well I know I can get out of debt. But if only I can find the right investment then I can get out of debt. You know this kind of thinking I think pervades a lot of our. Our psyches. Well that's not really what investing is all about. And so I want to share with you some principles. That will help you. Sift through the myriad of options out there that you can choose from because investing there is a a million and one ways that everyone and their stepdad is going to try to sell you. So principles on investing. We're going to just go through a list of a ten principles. And then at the end. This is the part you're all waiting for I'm going to share some of the X.. Investment that I personally have had experience with. And I'll even share a little bit of how much my yield has been and returns and so forth. Number one. The first principle and perhaps the most important is that investing is for defined. Future needs. Not for hoarding way back at the very first session we talked about three uses of money money only has three uses after you earn it. You can either spend it for current needs or wants. Save it for future needs or wants or to give it away. And so investing is got to fit within one of those categories right and a saving for the future is not saving for no purpose. Saving for a specific purpose. And so. L. Y. says this. Lessons page three fifty two paragraph one hoarded wealth is not nearly useless. It is a curse. It is in this life it is a snare to the soul drawing affections away from the heavenly treasure. The great Did God as witnessed on the use talents in the globe to opportunities will condemn its possessor. So we have this balance because we talked about we need to save money for future needs but we shouldn't hoard money. What's the difference between saving and hoarding. Let's take a look. Councils us to ship to fifty paragraph to head you and your wife. Understood to be a duty. OK. That's a word the L A wife three quickly uses when it talks. When she talks about making provisions for the future and saving and so forth that God isn't going to point to deny or taste and desires and make provision for the future and that's another word for saving or investing for the future. Instead of living merely for the present you could now of had a competency in your family and have the comforts of life. So we have a balance here in the Spirit of Prophecy we've got on one hand. Hoarding wealth is not. Not only a bad idea it's a curse. But on the other hand. It is a duty for us to make provision for the future. And there was another scripture we read in first Timothy were says. If you don't provide for the necessities of your family you have denied the faith. And you're worse than an infidel. Those are very strong words. And so we've got to understand there's a difference between investing for a set. Need. Versus. Looking at just getting filthy rich. With no end in sight. Just wanting more and more. And this is the reason why. I spent a whole session talking about creating a plan to talk about it yesterday in session of the three. Having a plan. Starting with the goal in mind and you are saving up for a specific purpose and anything extra beyond that you don't need it. And that's takes us actually to point over to. After you save up for all of your basic needs. All of your future needs a you have planned for everything extra should flow into God's Treasury and this is a little preview for tomorrow. We're talking about investing today but tomorrow we're going to talk about investing as well and the best investment is in the bank of heaven. And you're going to. There's some really interesting quotes from the spirit prophecy talking about this idea of investing in the bank of heaven. You might. You might find fascinating so we're talk about that tomorrow afternoon. So here she says testimony for the church one five page one fifty six. Brother and away from your life of selfishness and act like consistent Christians the Lord requires you to economize your means we've talked about that a lot yesterday. And let every dollar not needed for your comfort flow into the treasury. I love the balance in the spirit prophecy. Because she doesn't say. Let every dollar. Flow into the treasury. But she says Let every dollar. Not needed for your comfort. Flow into the treasury. God does not expect us to live in a cardboard box. OK. And so when we are saving up for the future. The balances. Have a stated goal. Have a modest life. Once you reach your goal. You don't need any more so give it to the Lord's work. OK. And of course. This is not negating. I want to make sure you understand. This does not negate the regular contributions of tides and offerings on the way. This is in addition to that. And we're going to talk about ties and offerings and all that tomorrow. So that takes us a principle number three. Take advantage of the power of compound interest by making time your allies ice. I threw this out there as a little teaser in our first session. So let's review what we talked about thrifty Tiffany spending Sally. All right. Both of them of the same age young ladies coming out of school. They have. So the Tiffany here the Start with her. She says two thousand dollars a year from age twenty to thirty two for ten years she saved two thousand dollars a year. Invested in a percent. Twenty thousand dollars saved. Of her own money over ten years. OK. Sally on the other hand she saves two thousand dollars a year from thirty to sixty five. Also at eight percent so she invests of her own money seventy thousand dollars over thirty five years. So looking at these two people. It looks as though. Sally is going to be ahead of Tiffany. She sees more. She's saving over a long period of time. Same rate of in return. So of course right. Well actually as sixty five years old. Tiffany here is going to have half a million dollars. Where. Sally is only going to have three hundred eighty thousand. So this is an illustration of the result of compound interest and compound interest is simply the mathematical marvel of interest. Being able to earn interest on a self. So it's like a snowball one year you earn interest on your money the next year. You earn interest on the principle plus interest of the first year. And then the next year is plus the interest of the next year. And so over time it becomes an exponential effect. And this is actually the graph of the earnings. The returns on the investment for Tiffany. In the blue and Sally. In the red. And so you see. What's the difference. Sally save more over a longer period of time they both have the same rate of return. The only difference here is that Tiffany started sooner. So the secret ingredient that you got a mix with your compound interest is time. Is time. And a mention. This also before I'm going to just breeze through this real quickly. The life hack for students. I gave the example. A theoretical example that as a student you can retire theoretically in ten years. And there are indeed people who have done this out in the in the world. If you earn fifty thousand dollars you live on twenty invest thirty eight percent again. In ten years you about fifty five hundred thousand dollars. And using the generally accepted safe withdrawal rate of four percent. That amount gives you twenty thousand dollars a year. So in Fieri. Your nest egg. Can Fund you for twenty thousand dollars a year and actually that also includes accountability for inflation. Going over in the future as well so this is another example of the power of compound interest. It can continue to work for you over time. And I share this life for couples. So I'll just summarize quickly what this is. If you get married and both of you are working for the first year of your marriage. Save one person's income take all the money from the wedding that you. You could be theoretically ready for retirement as well. So that it supports possibility based on this kind of rate of return and also investing for a long period of time so these are just illustrations of the power of compound interest and the key here is you've got to start early. And so the Chinese proverb this one that says the best time to plant a tree was twenty years ago. The second best time is now. And I think that's very true. But here's the thing. A lot of people. You know here this part of the presentation and they feel like OK I got to invest right now. But let's wait a minute. OK. While it is true that the best time. Would be right now there are things to consider before you dive head first into investing. There are other principles to come but in terms of timing. One is have you paid off. Most of your debt. Now. Certain types of debt if you've got a mortgage and things like that it may not necessarily be the same case but have a high interest credit card loans student loans car loans. You know money you have to return to family that you borrow from those kinds of things. That is YOUR BEST INVESTMENT. Paying off that debt. Because just think if you have seven percent interest on your student loan or credit card which is eighteen twenty twenty five percent. If you invest you have to match. You have to get in return. At least the same amount of interest. As interest you're paying out. Just to break even and let me just tell you something. The bank always wins. And so if the bank is charging you. Twenty five percent interest. I'll just tell you it is not reasonable to expect your investments. To even break even with that. And so if you want to get invest. Guest get investing and you have debt. That's YOUR BEST INVESTMENT. Because that also reduces your risk. OK. Nobody's going to have strings over your curing yourself of smallpox. And all the stuff that we talked about getting out of slavery. And the other thing I haven't really mention this too much. And that is don't start getting invested. Until you have an emergency fund. You need to have a cushion. Because investments can go up and down. And you want to have a cushion to cover in case emergencies happen and guess what. Emergencies. Do happen. And so you want to have at least three to six months of living expenses that the generally accepted rule. I know there are some who have the one year rule where if everything in life shut down. The family firm continues on for one year based on ours. Our savings. And my family is not quite there were probably about nine months. For that but there are. That's a good tip for ministries as well. Security in case of time of need. So that was number three. Make time your ally. OK so if you want to start as soon as possible because of the power of compound interest. As long as you have some of these other needs taken care of and you have a plan in place and all of that. So Principle number for investments. Should not take much of your time. And this is not so much a biblical principle as. So much a common sense. Principle. OK so what's the purpose of investing your money. Anyway. Is really. So your money will work for you and. You working more for your money. Because this is the whole point. You have earned. This money through your career or your work somewhere. And now you have this money that you wanted to actually increase. Instead of taking up more of your time. Because even Jesus himself in the parable of the talents he gave us the service the talents. But the servants themselves improve the talents but they didn't just you know. Work some more they were servants. And they have other work to do for the master which we all do. And then. Jesus as you should have given that money to the bankers or to the exchangers. And let them deal with it. So there's this idea of. It is in increase. Value on our time. So if we have money and the money is able to work for us we shouldn't. Investments as something that requires so much more of our time that it the tracts from giving our time and energy to other things that God has in our life as priorities. So money should be free us. Up. We talk about freedom yesterday. And investing the point is also the give us the freedom and so it shouldn't be another job is what I'm saying. So a lot of times people look at certain things as investments. When in actuality. They could be better classed as second jobs. OK So multilevel marketing. A lot of people talk about that and I'm don't necessarily think it's right or wrong thing. But it's not really an investment if you think about it because it's a lot of work. It's another job. And also mention this I'll talk more about this later but a real estate. Landlord ing can be a complete nightmare. It is an investment in the sense of. You have an asset it produces rent income. But managing it the process of doing it. Water private break. Pipes freeze. Roof blows off. People trash the place you have even people you have vacancies yet to find in screen renters. It's like a job right. So this is something to consider when you consider what types of investment you're looking into what is a value on your time. OK it's not necessarily wrong to spend time on it it will take some time. But if you're looking at it as OK I want to invest in this but it's going to take me. You know twelve hours a day sitting in front of the computer watching the stock market and doing day trading. I'm not sure that's investing. You're a trader. Not necessarily an investor in that case so it's the value on your time. All right. So. Number five. Never invest in something you don't understand. Underscore underscore underscore underscore never invest in something you don't understand. OK. You won't believe how many people fall for this one. So what do I mean when I say understand. What do we need to understand. OK. How does it make money because just because someone says this is a great investment you should invest in it I've done it I've earned this much money. That doesn't mean you understand a thing about it. How does it make money. And just as important. How can it lose money. And I'll just mention this. There is no such thing. On the earth. Except in the bank of heaven nothing here on earth that is a risk free investment. You think oh it's f.d.i.c insured well really. Are you really going to trust the government to ensure your money. How can it lose money how can it make money how can it lose money. What are the costs. This is another thing with real estate I'm throwing this out there. A lot of times and we think about real estate with. We think oh this is the mortgage payment. This is a rental income. Bam. You know. It pays off my mortgage. I'm golden. Well guess what. Owning a home. They were a good zillion costs. Not only is there the insurance and then if you have a low amount of down payment on your mortgage of mortgage insurance and then you have to pay taxes property taxes. And then you have maintenance. And they have yard care. And they have to furnish the place and fix it up another that other that other the lawn and on the list goes. What are the costs. OK. And then if it's another form of investment. What are the fees involved. Are there are there costs that are hidden from sight. Maybe it's not actually something you pay out. But maybe it's a percentage that gets skimmed off the top of your returns. And you not do you just don't know about it but it's actually impacting you. What are the costs do you understand how they work. And then what are the rules and regulations. This is obviously I think this is an obvious case. You know. Am I allowed to actually rent this house out or am I allowed to do what I'm doing with whatever it is I'm looking to invest in OK. I want to build an apartment complex. Well. Is a zone of the right location right those are some of the questions. So do you understand when a friend tells you this is hot stock you've got to buy. You know there's one thing I help. Helps me whenever a friend tells me. Oh you got invest in the stock. I ask myself is my friend Warren Buffett. If he's not Warren Buffett. Does he does he have better rate of return than Warren Buffett. The answer is No then I say no thanks. And I don't know Warren Buffett so. That's just something that helps me out so in other words. I never take stop to tips from my friends. It and investing fad. You've heard about Bitcoin. Do you understand how it works. OK Too good to be true business opportunities. You get letters in the mail. You know if you're a doctor or dentist people think that you're wealthy people are going to start pitching you ideas I've got this new idea I want to do the startup. You know I'm going to make this app and it's going to be like. So big it is too good to be true most of the time it probably is OK. Is that a Ponzi scheme a Ponzi scheme you heard about Bernie made off. His name is so ironic because he made off with people's money. But he is in jail now largest Ponzi scheme ever. Swindled. Sixty five billion dollars from his unknowing clients and Ponzi scheme basically he got people in. And then as he got more receipts of money. The people early on that want to cash out he would promise them. Sky high returns and he would be able to keep up this. You know this act until the pyramid comes crashing down. And they always fail. And you know when we talk about athletes go broke and all that. This is actually one of the biggest reasons why they go broke. If you read the articles about them. A lot of them. They have all this money. And people come to them and say hey we're going to help you keep your money you earn millions we can invest it for you so you can have a long future and all this stuff. But what happens is they end up not investing or investing in stuff that they don't understand. And so they get swindled out of a lot of their cash from quote unquote well meaning people. And yes that's an extreme example looking at athletes and all that but what's to keep us from falling into the same ditch. So the point here. You just can't miss it. Never invest in something you don't understand. I'll just mention this as an example because someone brought it up to me in a question yesterday. Whole life insurance. OK. Recently my wife and I got Term life insurance we got life insurance because we have a baby now and I have an article I just wrote on on the blog can read more information. But people asked me why then why didn't I get whole life insurance. Whole Life insurance is an insurance life insurance policy. Couple with the. Investment Plan. The simple reason is I can never get a straight answer on how they work. And the costs are foggy the returns are sort of questionable. And the business model makes me wonder about who is in whose interest and who's in who's pocket. And so whole life insurance. I can't really even explain to you how it works and therefore I don't invest in it. OK. So that's just an example. Number six. Don't try to get rich quick. Don't be greedy don't speculate. These are all saying the same thing. And this is a principle scrape. Straight from scripture. Proverbs thirteen eleven says wealth again hastily will dwindle but who ever gathers a little by little will increase it. Probably twenty twenty a faithful man will about with blessing for whoever hastens to be rich will not go on punished. The love of money. Ladies and gentlemen is the root of all the evil. And this right here haste the haste to gain well. That's called the love of money. OK. In very practical terms. So let me share with you the story of tulip mania. So go with me back to the sixteen hundreds in the nation of Holland. There was a crazy. There was a craze for two lips. What would you think if I told you you should invest in tulips. Would you think oh yeah. It's a good idea. Well actually. If you're a farmer maybe. But here. In Holland. There was this something sparked a deep interest in tulips they thought that they have found this new market over an Asia or some other parts of the Middle East or something and they have this huge demand for tulips and special varieties and all and all of this. And so the price of tulip bulbs. Went through the roof. They say at the peak of tulip mean mania. The price of a ball would go for ten times the end you will wage of a middle class man. One ball at the peak. And the prices shoot up in one month they said it went up by over a thousand percent. And so what were people do. They would speculate on tulips. They would buy a contract they would even buy the tulips they go to the pharmacy you've got to lives. All right. They're not ready yet but before you dig them. I will give you a contract. In which I will buy you know. And worth of to a ball. That is just an example of what it might look like. And he would say let's say he pays a thousand dollars. And then you go to the market and say I've got an acre of tulip bulbs. Four thousand dollars. How much would you be willing to pay for it and someone will pay two thousand and four because they think tomorrow I'll be able to sell it for four thousand. Because that's the price right that's the price that's going up. This is what's called a bubble. And this is what happens when people start speculating. Assuming that the price is going to continue going up and up and up and up and this is actually. I think what most people associate when they think of the term investing. But that's not investing. That's speculating. And so of course one day someone realizes this is really dumb. One two above is not worth ten years of my working life. And so the demand dried up as happens to all bubbles the bubble popped the prices crashed. Entire Dutch economy nearly tanked. And we might be thinking. COME TO lives. That never happens. You remember what happened in two thousand and eight. It was the same thing. Except there was with houses and property. People were speculating that the housing market is going to keep going up and up and up and up and up and up and then the pot. And so people were looking at it from the greediness of their heart and saying I want to speculate in this I want to get rich quick. And we don't want to repeat the history of tool of mania. And so what's the difference between speculating and investing. What's the difference. Well speculating. Is hoping for quick riches investing is patient and study for the long term. That's a fundamental difference. Speculating the motive is to get rich. Investing the motive is to meet our needs. OK. Speculating is based on arbitrary price movements. Whereas investing is based on the expected product to Vittie of an asset. So it's not wrong necessarily to invest even into lips. Right. If you're a farmer and you believe that tulips are going to sell so much on the market if it's based on the product to be of the land how much is this Langan to produce and flowers each year. That's a productive asset. But if you are arbitrarily hoping someone will pay you more tomorrow for what you bought. Bought a Ford today. That's generally speculating. And so when we talk about stocks in the stock market. You can invest in the stock market by looking at the business and seeing what is the product to Vittie the value that this company will generate or you can look at it as just a slip of paper. Who's going to pay more for it from me. Tomorrow. Speculating is worried about the price. The question is what is the price was investing says. What is the value. All right so these are some framework for thinking through the difference between speculating and investing. So we don't want to speculate we want to be investors. Seven. Balance risk and returns. So this is the part I have to make sure I explain clearly. So all investments. Have sort of this tug of war between risk and returns. Returns are what we earn on our investment so there's like the did. The interest that we are on the dividends or capital gains on on our property on our investments assets risk is basically the possibility of losing our money on the investment like a market crash alone default or things of that nature so every. There's no such thing as a risk free investment so that means. Every investment is going to have a risk and return. And they are usually on a spectrum. With each other all investments of risk and higher returns. Correspond with higher risk. So if you have an investment. That is you know supposed to return. Eight percent versus something that returns. One percent. You can know that eight percent of vestment is always going to be riskier than the one percent. That's always the case. However just because something is higher risk. Doesn't necessarily mean that it has higher returns. You've got to keep that in mind because is the lottery pretty high risk. Yeah and people think yeah if I hit the jackpot right. But the fact of the matter is it's a loser's game. So that's gambling. That's not investing. And so once again the gambling is high risk and low returns. So used to want to keep that in mind. All right so we got to dig a little bit deeper here so when we think about low risk accounts were thinking of things or investment thinking things like money market accounts C.D.'s savings accounts bonds things of that nature. And they are low risk. And some of them aren't guaranteed. Like if the I.O.C. insured accounts. But they may have returns that lag. Inflation. OK So this is a term that you've got to understand. Inflation has historically been about three to four percent for the past century. And we all know what inflation is right. You remember how much you pay for a stamp a couple years ago is like every year is I fifty cents an hour something I remember it was a twenty something cents. So it's like double the price for the stamp and investments to lag. This figure actually is losing purchasing power in the long term. This is something very important to remember. Because we may think I'm putting my money into a savings account. And it's guaranteed to not lose anything. It's not going to go up and down. One hundred dollars is going to be one hundred dollars in five years ten years twenty years. But here's the problem. Let's say nine hundred ninety had ten dollars in my savings account. The ten dollars and nine hundred ninety. Would buy what's equivalent. Eighteen dollars and forty eight cents today. So yes. Your ten dollars hasn't decreased in dollar figure amount. But the actual amount of goods that it can purchase for you has in fact decreased by a large percentage. So what am I saying. In actual purchasing power. If you are just in a low risk account that lags inflation you are actually losing money. And this is why investing is so important because I tend to associate this. If we put all of our money in losing. Accounts. Over time. That sounds a little bit like bearing my italian the earth. That's just me though. OK volatility is short term risk so there's a flip side to this coin and that is so. What about those investments that perhaps do have the higher upside. That beat in inflation. So quote unquote the high return investments that beat inflation in the long term. Have the short term risk in the form of volatility. So if you have higher returns you have higher risk is not guaranteed it's not insured by the F.D.A. I see and volatility is simply the up and down price movement. And this is what you hear about on the news about the stock market from day to day. You know Apple is trading at ten percent down today. You know you hear that on the news all the time there talk about volatility. And so here is where I get my eight percent figure. OK so. The S. and P. five hundred stock market index which is probably the best measure of the health of the U.S. stock market as a whole. As we turned around eight to nine percent annualized returns. About the past century. OK. And factoring in inflation real returns are actually more like four to six percent. So eight to nine percent before inflation has been the historical track record of the stock market in other words and. Because of that. This is the reason why I use this as the benchmark. It is the general health of the overall U.S. economy. And also you can. It is possible to invest directly in the S. and P. five hundred. It is a valid form of the vestment and X. fund I'll talk more about that later as well. And so this is why I use the eight percent figure. Now I will make this Kavita every investment. Prospectus that you read will see it past returns are no guarantee for future performance. That's just a fact for any investment. This is simply looking at history. This is the best guess we have in the future economists are predicting that we're going to have a period of lower yields than that so I don't know. I don't know if this is going to continue. But I do know that looking back for a long history. For a long period of time. This has been the case. All right so that's the reason why use a percent. For those who have been curious. But back to my point here about short term risk and beating inflation. So we've got this investment here. Let's say the S. and P. five hundred index fund. You invest in that over the past thirty years or so and it's or twenty five years rather I think is what I have here. And eight to nine percent. As a potential. Ten dollars invest in one thousand nine hundred forty four dollars. OK. But of course this forty four dollars. But the ten dollars rather is more inflation in inflation adjusted terms it's more like eight hundred fifty. But yet forty four dollars has far surpassed the eight hundred fifty. But of course. The volatility the bumpy ride the talk about is that this figure the ten dollars. Might have dipped down to as low as five dollars or less along the way to get up to the forty four. Does that make sense. So it's not a straight line. It's like a roller coaster is a jagged line. But if you look at the overall trajectory of the stock market. It is gone straight up. But over a long time horizon and that's my point. So having said all of this. Let's summarize long term and short term risk. So the risk of losing money. This is sort of a quandary because in our savings account example in a week. F.d.i.c insured account is guaranteed not to lose money so in the short term. It's very low risk. My money is not going anywhere. Inflation is not going to affect me in a week. Right. And then in a decade however it's very likely to lag inflation so I have poor long term returns. So that's the problem with putting all of our money in a savings account or a savings bond or something like that. But if we invest in the stock market on the other hand in the S. and P. five hundred as examples I used earlier in a week. The market can lose half its value. I mean it's happened before and that's a poor short term risk. Very risky in the short term but in a decade or more. The history shows is very likely to not only recover from the crash. But also exceed the rate of inflation so in the long term. It gives you some good potential for a long term results that beat inflation. So what do we do what's the practical application here. We've got to pick our risk. Wisely. OK. So this is. Sorry. Are typical. Four by four quadrant here. So we've got short term long term and then low risk high risk and what we want to do is was stick in the low risk section. I want to minimize our risk. But yet balance out the returns that we get so in the short term. We want to put things. Our money in things are generally going to stay stable. So insured accounts. US bonds. Money market funds things of that nature long term. These are long term investments stock market real estate land. Things of that nature. And you want to split your money. Between them. OK. You want to save for the short term and invest for the long term. And so. Yesterday we talked about our seedings plan. How we have a long term savings plan and a short term savings plan. So this is very easy to remember. Short term savings. Five years or less long term savings. Five years or more. So if you don't need the money for more than five years invested in something that's higher yielding take a little bit you can take a little bit more risk with it. Say for the short term make sure you secure that money in an account that's going not going to just disappear. If the market crashes. And so like things like retirement. Children's education and that kind of stuff. Invest for the long term. If you're saving up for your next trip to Geo I see next year. Keep it in a savings account. OK. Is that clear. Does that make sense. And I'm running through this pretty quick. But that was an important point. Now related to that is point number eight here which is the principal diversify. It is actually we were just talking about diversification here. But the Bible tells us Ecclesiastes it is eleven verse to give a portion to seven or even eight. For you know not what disaster may happen on the earth. Another way of saying it is don't put all your eggs in one basket. If you invest all of your money and one company. And that company just tanks. Is what you do to. And so what we're talking about earlier is is actually exactly this. Putting some of your money in short term savings and some of the money in the long term savings that's a form of diversification. All right. And you can also diversified by different asset types. If you have all of your investment in one rental property in one region. Right one house. A tornado comes an earthquake comes. You're not very diversified. It's all eggs in one basket. But if you have rental property. And you have mutual funds. And you have investments in your business or somewhere else. Then you're not going to lose everything if one of them fail. OK So that's the biblical principle. To diversify. Number nine. You want to be mindful of costs and taxes. Be mindful of cost and taxes. We talked about compound interest. Helping us and it's like the secret to investing. But there are also things going on as compound in costs. OK So cost you have to pay to invest. Year after year after year after year and taxes. And all expenses would fall in that category. And these compound in cost will negate your compound interest and the higher returns that you would be a getting otherwise. So your returns might be you know. Five percent say. But after taxes an annual expenses. And you know in there three percent your returns actually two percent. Just as an example and so you want to be where of the high broker fees and hidden transaction charges. Those things add up over time. So I'll just mention briefly here you want to use tax sheltered accounts. If possible. So these are some of the common ones. Retirement accounts. There are two for one K. for three B.. These are the employer sponsored accounts or you can take advantage of if you have them with your employer. Not everyone has them. But if you do it or you can open up individual IRAs. Or Roth IRAs. And they have different tax treatments. You know pretax post-tax when you get taxed on them winning us out we're drawn a lot of rules I'm not going to bore you with all of that you can look into it if you are interested. Now I will say one thing. If you have a for one care for three B.. And your business or your employer offers you a match. Meaning if you can. If you contribute so much then they'll contribute so much. To match you. You always want to take the match. Because it's free money. Nobody should leave free money on the table. OK. And yes I know as I always can be locked in is going to. Are you going to tell me you're not going to take free money. Because you have to wait to access it. So like have a marshmallow now or wait and have to later. Same concept right. Take take the money. That's my point. Take the money or get college there also college savings accounts five twenty nine. That USA are two different forms of tax benefit college saving funds. Of course they have strings attached and all that kind of stuff you can research it even a health savings account. Health Savings Account as a way to minimize your health expenses with tax advantage savings. So I know you probably have a ton of questions about this. I'm just throwing it out there. Never invest in something you don't understand. So go and research this more of you are interested but I don't have time to go through them in detail or at point of ten here last principle before you get into some other stuff for investing we need to stay the course. But have an exit strategy. OK. And the stay the course part probably is the biggest problem. But as advantageous. With a special end time understanding of world events. This gives us some reason to be thinking about an exit strategy you know share with you why. So let's talk about staying the course first. Emotions and investing. Are not a good combination it's not you should invest using the math portion of your brain. Not the emotional portion of your brain. Don't invest based on emotions or fads. You know you have your water cooler talk with your friends and they're like men this is an Awesome. Stock that I have or man I earn so much money on but coin and all of the stuff and you're like man I'm like behind I'm being left behind by the Joneses well. They didn't tell you that the other three investments totally failed. You know I'm saying. Like people talk about that. So don't go by emotions or fad because what happens is you buy in when everyone is so happy and you buy and when it's too high. Right before it crashes. And then when it crashes everyone a sad and you sell out. And guess what you just locked in your losses. You don't want to do that so. Ignore the noise sometimes less information is better. Don't listen to all the noise over the housing market is on the rebound you don't want to miss it. Interest rates are going to go up. The Federal Reserve raise interest rates in a couple weeks ago so now's the time to buy your house. BYE BYE BYE right. Ignore the noise and focus on what your needs are and what the numbers tell you. OK. Because this is the way to get emotionally involved and then you end up making rash decisions. So just be regular be systematic and be in it for the long haul. The number one reason why people lose money on their investments. Is a buy and sell and they treat in and out of stuff. Without knowing why. They just do it. But if you just buy whatever. Be a real estate deal. Or even if you're investing in some other store sort of investments. The key is to be regular and to be systematic and to look at the long haul. And then saving your savings rate as a mention before number one secret to wealth building because you have the most control over it. So let's talk about the exit strategy for a little bit this comes from the Spirit of Prophecy councils and stewardship it fifty nine paragraph or houses and lands will be of no interest to the saints in the time of trouble. Their houses and lands. I can use a broader term of just all assets. All assets 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 incumbrance before the time with trouble comes and make a covenant with God through sacrifice. If they have their property on the altar and earnestly in cargo for duty he will teach them when to dispose of these things. And then they will be free and the time of trouble have no cloggs to weigh them down. Continuing. Page sixty. I saw that any held onto the property and did not inquire of the Lord as to their duty he would not make duty known. And they would be permitted to keep their property and in the time of trouble. Come up before them like a mountain to crush them. And they were tried to dispose of it but would not be able to her some more like this cause was languishing because people were starving for the true then we made no effort to supply the lack of our property. The supply black now our property is useless. Oh that we had let it go and laid up treasure in heaven. OK. Next paragraph last one I saw that a sacrifice did not increase but a decrease and was consumed. I also saw that God and not required all of his people to dispose of their property. At the same time. But if they desired to be tot he would teach them in a time of need. When the sell. How much to sell. Some have been required to dispose of the property in times past to sustain the admin costs while others have been permitted to keep theirs. Until the time of need. Then as the cause needs it their duty is to sell. So it's pretty clear spirit processing makes a sweeping statement there will come a time for adding believers. To cut off all incumbrances. And we remember the parable of the or the vision she saw the narrow way. Eventually all the wagons are going to go overboard. A notice here. We're going to talk about this. Specifically tomorrow about selling everything the end times and all of that I do I mention this. We're not selling. Because for the sake of self preservation. Notice she's saying. Selling in every case. Selling is for the advancement of the cause. When will God's work need the means to give the final push. It is never in the context of. When is it. When do I need to let go to save myself. There's a difference here in the thinking OK. But what does this for profit action actually say. What are the principles from what we just read rather. So it is the will of God at the same every incumbent before the time of trouble comes. God does not require all of us people to dispose of their property all of the same time we must. Earnestly inquire golfer duty and he will teach us when to dispose of the things. And if we don't inquire of God. He will permit us to keep things. The property and will be a huge burden that we won't be able to dispose of. So these are the principles from the three paragraphs that we just read. So practical applications speaking of our investments. So yes we save for future needs. We continue on occupying till he comes. Performing the duty of providing for a family's necessities and all those things with the understanding that some day when the Lord A before the Lord returns before the time of trouble. There is a point where God's work demands everything. There is a point. But when is it. He'll tell us when it's not something that I tell you when or anyone tells you when God will show you the duty. So with that in mind when I look at my investments. I ask a simple question. How easy is it for me to liquidate this. To put it all into God's work. When the time comes. OK. So I got to have in mind. The exit plan. So as not to say that you should just go in and out in and out in and out that's not the point the point is because we know what the spear process says we should at least give some thought to what that process will be. So if I have property. How long would it would it take for me to sell it. We've got to be understanding of this. Right. And then I would give higher. Preference to investments that are easier to get rid of to those the lock us down so that's a question of liquidity. All right so this is an investment screening checklist. Based on the principles that we talked about for helping us screen appropriate. Investments. And a lot of this is subjective to you. OK So is it easy to understand obviously. It might be easy to understand for me. It might not be for you or might be easy for you to understand and I don't understand that this is based on your personal research. Do you understand how the system works. How much time is this going to take me to manage it is a speculative. Is a diversified. Is this an insured type of investment. Which is what we look for for short term investment. There's a beat inflation for long term investment. Is it a low cost investment. And how liquid is it. Meaning. Thinking about the exit plan what is the process that I have to go through to to dump my assets when God asks me to go so eight points based on our principles. To screen out. Evaluate the investments that are available to us. So let's talk about some of the investment specific types I have been have experience with. So for short term investments these are the things that we put money in for five years or less. CD savings accounts money market. Bonds. And also the S.T.A. Union revolving funds. So what are they will see the savings accounts I think. I don't need to explain to you what those are hopefully. But you already know how low the interest rates are. You're lucky to get five percent are I'm sorry you're going to get one percent on your savings accounts and C.D.'s nowadays. But my guess is they'll start going up soon. Bonds are not to use. Dissimilar you can buy bonds in companies or in cities or bonds or states or bonds for a U.S. government the federal government. And then an S.T.A. Union revolving fund this is something many of you may not be aware of. You can actually invest in the church. You can get these funds where you loan them money. And the church the union wherever your base will then loan that money out to their local churches for church building projects and whatnot. And the churches pay back the conference of the Union. And you get a certain percentage as interest. OK so you can invest and advance God's work at the same time with the revolving funds. And all of these are secured. Or rather insured or guaranteed in some way. Well except the money market here but savings accounts of C.D.'s f.d.i.c insured or if it's a C.. If it's a credit union. As well. Bonds are insured by whatever level of government you're buying the bonds from. And then S.D.A. church backs. Their revolving funds with the full faith and credit of the agonist church. So savings accounts or short term investments. These are the ones I have had experience with and. The interest rate. They vary. Right now obviously they're very low. They have been much higher before. So you just got to ask your question do they pass these screens. You've got to ask yourself that question. So let's talk about long term investments or hey this is where everyone is really curious. These are three forms of investment that I have had personal experience with. There are a gazillion of other options. But I'm just going to focus on the ones that I've had experience with myself. So real estate. Let's start there. Real estate. In my experience has a lot of pros. But a lot of cons. Is that easy understand Yes I think we all understand how they work. Is a speculative generally not. Not if you just renting it out. There's a beat inflation yes. And if you are curious the little rental house that I have on my on my property. I've been getting a ballot. Ten to eleven percent return on that property. And I know people with investment properties where they earn far north of that. OK so it is definitely possible. But it's not low cost. Already explained a little bit that before. And it's not liquid. You can't just sell it in a business day. You know it's going to take time to listed and sell it. And then a lot of times if you want to sell a fast. You take a loss to move it quick. And then how much time to manage. I mention that already before I could take a lot of time to manage but real estate is a very reliable and stable source of income for a lot of people so it is a valid option. And I have had some experience with it. But there are those pros and cons. Now. Peer to peer lending is something fairly new and something fairly interesting. These are the two companies I'm familiar with. I don't know that there are any more out there. But Lending Club and prosper. These peer to peer lending services are online based where the allows you to be an investor to lend money to people who need to borrow. And the service is set up to you know meet whatever the S.E.C. requirements are and they are the ones that you know maintain the anonymity and they do the processing and they charge you a small fee. But you can go and you can screen the various applications of people looking for a loan wire the water they need a loan. What's their credit score was their credit history. You know what is their little description of that whatever they're trying to raise money for. And then you can diversify you don't have to give them the full some. You can invest in small chunks even twenty five dollars per investment. So you can diversify again there's that principle. Across many loans. So if one person the faults on the loan you've got the other ones to take their place. OK. And so this is more for you to go and research for yourself. If you are interested in essence. It allows you to become the bank. You can be a bank to loan money to other people. And in fact that's what the Bible said. When we read about the children visible. You shall lead to many nations and shall not borrow. Here's an opportunity using technology for us to actually do that and. For me my rate of return from using Lending Club in particular has been about nine percent. OK. So it is possible to get more than that of course you take more risk. OK. And there's no guarantee right people my default. And things of that nature so there is risk involved but I have been able to get over eight percent around nine percent. So you want to do the research screen it appeared a peer lending is an option. OK. Mutual funds. I got to talk about this because this is the most common form of investment. If you have say employer offered. Investment account of some sort. And what our mutual funds or mutual funds is a an investment vehicle where many investors pool their resources together. And a professional fund manager. To example of funds and invests across a diversified body of assets or securities. Based on a stated objective. And so it's by nature designed to be diversified. And to not be speculative. And to not take much of your time. Because you're just putting your money in this pot. And the professional is going to manage it for you. It's very liquid. Generally one business day. You can cash it out. And there's a beat inflation. It can beat inflation is a guaranteed to. Well. Depends on what fund and what happens. But sometimes it's not so easy to understand because some fund of ject of our little bit shady their stated very Glee's so that the fund manager can sort of do whatever you want. So you want to really research than the C.V. understand. And often not always often mutual funds can be very costly. There are the front end loaded there's marketing costs and then there's annual expense ratio and all of that kind of stuff. You need to make sure you understand where the costs are coming in because you might actually not be earning very much. So those are mutual funds. And it is actually very common for people in their retirement accounts like I mentioned. So even if you don't choose invest in them. It's good to understand how they work. In case something that you run into at your workplace. So now this leads us to index funds because index funds I believe the mitigates the two biggest problems with regular old mutual funds. Number one. They're very easy to understand because an index fund by definition. Is it matches in index. It's an index of either. A stock market. A segment of the stock market or bond market. Or even other asset types. And so what it means is when I talk about the S. and P. five hundred for example you can look for an index fund that tracks. S. and P. five hundred index. And essentially. You've replicated. That measure of the stock market. And so it's a one stop shop. You can purchase it. And just like a mutual fund. And someone else will manage it for you in fact it's mostly done by a computer probably. And because of that. It's very low cost the. One of the lowest cost forms of investment is index funds and I'll just mention this. When you're looking at mutual funds one of the best predictors of success for any fund is the cost. Pretty much to lower the cost of more successful is going to be over the long term. That's just as a rule of thumb and index funds you can't beat them. OK And how liquid is it. It's the same you can cash it out in like one or two business days. So this is my personal preference. In my investments. And I was just looking at it this morning over the past five years. My index fund that I have that tracks the stock market. It's returned about sixty percent. That return is about a little bit over ten percent per year over the last five years but I will say. The last five years has been somewhat abnormal. Right. The market has been going up. So that's not to say that's a track record for ever but for the past five years it has been over ten percent each year. And so I will mention this as well this is the company that. Personally I choose to use for my index fund investing Vanguard. They are the granddaddy of investing. Of index fund investing. And they are the cheapest option you're going to find and greatest determination of future success. So vanguard you want to check them out. What about individual stocks I'm going to conclude here very shortly. Everyone always ask well what about investing in individual stocks. I don't recommend wreck. Investing individual stocks for a couple reasons. We could go through the screening process but I'll just mention this individual stocks. Can be very speculative. In the sense that it goes up and down and you have to really be on top of its understand what's going on and they can be very costly to invest in every trade you make you have to pay a transaction fee. And there are the costs of taxes and on your dividends and all that kind of stuff. And so I don't recommend individual stock investing for general lay people. Not that it's necessarily a right or wrong thing there can be stocks that you should involve get involved with. And there are socks and good companies. But as a general rule I don't recommend it for most people. And those are the reasons why. So let's summarize here as we conclude here session over five. Careful stewardship means we aren't burying God's money in the ground. We need to invest for needs. And not to hoard all extra money from our investment should flow into God's work. Leverage compound interest. We need to start now. OK. Never invest in something that you don't understand. Very very important don't try to get rich quick. Don't be greedy. And don't speculate. Save for the short term. Invest for the long term and I just find what I mean when I say those two things. And then diversify. OK. Be mindful of cost and taxes they're going to erode whatever compound interest gives you stay the course but have an exit strategy that's based on evidence understanding of the End Times. And then God permits the only of assets yes. But we need to lay it all on the altar for him to tell us what to do with them. And the reality is with this last point. This is true whether we live in the end times or not it doesn't matter is that the time of trouble is soon. That's irrelevant. If Jesus asked us like the rich young ruler to sell all that we have doesn't matter when he's coming again. We should sell all that we have to understand. And so this here is always the case. All of our assets belong to the Lord it's always on the altar for him to do as he chooses. So this brings us to the conclusion and I am over time I apologize for that but let's conclude with prayer. OK. I'm going to pray and then we have one announcement right after that. So let's let's pray. Father in heaven I ask that you will guide us as we go to outreach now bless our time together help us to apply the lessons we've learned today to our investing practices that we might give glory to bury our talent in the earth. Pray these things. Jesus. This message was recorded at the G Y C twenty fifteen conference cold. Chosen in Louisville Kentucky. You want to see the supporting Ministry of a Seventh Day Adventist Church. Seeks to inspire young people to be bible based Christ centered in soul winning Christians. To download or purchase other resources like this visit us online at W W W G Y C web.


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