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3. Increasing the Talents: Investing for the Future

Alistair Huong
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Should a Christian invest?  If so, what's a good investment vs bad one?  How do I not get scammed?  What about bitcoin?  This presentation answers all these questions and more by providing guidelines that can be turned into a values-based investment screener.

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Alistair Huong

Executive Director of AudioVerse

Conference

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  • December 28, 2017
    2:45 PM
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This message was presented at the July see twenty seventeen conference. In Phoenix Arizona for other resources like this visit us online at Deb you Deb you Deb you dot. Org. All right this is the hour you've all been waiting for I guess what I've been sensing with the questions I've been getting what do you think of crypto currencies what of that coin of already been asked like five times today so. If you listen carefully by the end of this seminar you'll have a pretty good idea where I stand on that session over three increasing the talents investing for the future. Where is this concept increasing the talent where is it found in Scripture. The parable of the talents we're going to take a look at that in a moment so for those of you who are familiar saving the crumbs dot com is the website where my wife and I write about personal finance and also audio verse two years ago G twenty fifteen I did a seminar groups on called Beyond the tie the personal finance You can also go there for further information there are a lot of things covered there that I'm not covering here and in particular back then that coin wasn't quite as big of a craze as it was it is now but you probably wish you got some back then at least of the few who are paying attention to the markets anyway investing So let's start with the foundation when you start from Scripture and derive our principles by which we evaluate or why invest how to invest how do we approach this what does the Bible have to tell us so we already looked we already mentioned the parable of the talents and this is what Jesus says or the master said to the servants Matthew twenty five twenty seven you ought to have invested my money with the bankers and am I coming I should have received what was my own with interest it's very direct you should have invested my money there it so should we invest based on the Bible I believe so and you remember the story there were three servants one had five talents one had two one had one. What was the rate of return is a tricky question for the one with five he doubled his money was the rate of return was the percent one hundred percent return what about the one with two. So in a sense did they have the same performance Yeah of course they got they doubled their money what happened to the guy with the one so what did he do rather he buried it in the ground he didn't lose the town. Keep that in mind he didn't lose the capital he just didn't grow it so he says you should have invest my money and you know when we talk about the parable of the talents it's frequently we take that parable and we immediately spiritualize it everything under the sun is a talent except money it is like you have your speech you can sing your artistic you're good at math whatever the talent might be you should increase it for God but money oh no that's evil right that's greed you should invest your money well the very symbol or the illustration is use money it is a talent and to make that abundantly clear let's see what I mean why has to say councils and stewardship is one thirteen paragraph one the followers of Christ are not to despise wealth they are to look upon wealth as the Lord's entrusted talent there it is by wise use of his gifts they may be eternally benefited but we are to bear in the fact in mind that God has not given us riches to use just as we shall fancy to indulge impulse to bestow a withhold as we please so the important point here is that yet we should increase the talents but not for our own personal gain or glory but for the purpose of the purposes of got all right a couple of the principles and then we're going to tie it together Christ object lessons page three fifty two paragraph one says hoarded wealth is not merely useless it is a curse. In this life it is a snare to the soul drawing the affections away from the heavenly treasure because where your treasure is there your heart will be also that's a biblical principle and so we're we're we're told here that we should not hoard our wealth that's a curse but yet we just read we should invest but don't hoard So you see there's a balance here where we should be growing the resources God has given to us but don't hoard it we're not the goal is not to be filthy rich What is the goal. Use it for the Gospel Yeah OK let's take a look at the statement also counsels on stewardship issue fifty paragraph one had you and your wife understood it to be a duty that God has enjoined upon you to deny you taste and desires and may prove vision 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 so why do we invest is to make provision for the future the purpose is to save up invest so that in the future when we generally speaking is when the time when we don't have as much earning capacity our family will not suffer lack they can stop the comforts and conveniences of life so to provide for the future that's why we do it to meet our needs not to have an ever growing cash pile remember the story of the rich fool in the Bible he said Oh I had a great harvest let's build we fill up our barns a little bigger barn let's fill that one and then Sol take the easy drink be merry and God says You fool tonight your soul be required of the what shall a man gain if he shall gain the whole world but lose a soul right so that's the principle here but yet providing for the needs of the future go to the entail sluggard right preparing for the winter when summer is around testimonies for the Church of Volume five page one fifty six paragraph one. Brother in away from your life of selfishness and consistent Christians the Lord requires you to economize your means and let every dollar not needed for your comfort flow into the treasury So this answers the question what about the surplus So let's say I'm investing and I have more than I need what should we do with the rest very clearly let it flow into God's Treasury so see how this works of God does not say give me all your money first God says take care of your needs first and then the surplus let it flow into the treasury exactly or. So let's summarize what we've said so far so the foundation biblical principles of the foundational biblical principles for investing number one we asked service of God managers of his means stewards whatever term you want to use we are responsible to increase our talents which includes money all of our talents that's what the parable of the talents were telling us as stewards literally servants we are to increase the master's talents the money and money is one of those talents but what's the objective number one or the objective there are two here or yet sort of two objectives one is to make provision for the future future needs to simply have enough not to hoard or to get filthy rich and then secondly to have a surplus so you can flow into God's treasury money to go advance the work of God that's it so investing should we invest yes why do we invest to meet our needs and have a surplus return to God Is it to become filthy rich No Is it up the rich it's the be the richest man in the graveyard No Is that clear. All right so let's get practical investment principles so I had to hate to break it to you but there are no perfect investments on this planet everyone always wants Hey kid is there a safe investment that I can put my money that would give me a large return with no risk doesn't exist. There's actually one and that's called investing in the bank of heaven that if you read the Spirit of Prophecy makes it clear you can send your treasures up ahead and it accrues interest up there and when you get there you get it all back plus interest and you have no no loss of principle of course of that's assuming you're there right so. But here on this earth since we don't have any perfect investments the best we can do is to come up with a way of evaluating our options and to do the best we can so there will not be a perfect investment I just have to say that up front you're just going to have to accept that there's going to be some tradeoffs and we're going to have to make a judgment call based on what options are available and so what I'm going to do now is I'm going to go through a list of ten principles of investing. And usually when I give the seminar I sprinkle it with examples from all different types of investments and I'll still do a little bit of that but since everyone is on this Bitcoin craze I'm going to be injecting Bitcoin. Specifically as a lot of the examples so you're going to pay attention because I'm not going to sit here and actually do a lecture on bitcoin I'm going to I'm going to be so sharing with you investment principles sprinkling throughout a little bit of how big point interact with these principles and by the end of this thing you should be able to take a look at the principles and evaluate it for yourself and decide is it good or bad so you can have to think Is that OK Are you awake. About five in your wake. If I said I'm going to show you how to make a million dollars with good point I think everyone going to be awake but anyway we're not going to do that we're going to share some principles so principle number one for investing number one never invest in something you don't understand I cannot underscore this enough if you don't pass this first criteria the rest of them don't matter I derived this principle from here in Proverbs Chapter twenty four verses three and four through Wisdom is a house build it and by understanding it is the stablished and by knowledge shall the chambers be filled with all precious and pleasant riches the biblical principle is we do not get rich we do not build wealth through ignorance or through wishful thinking we need to be intelligent to exercise wisdom understanding to you know discover knowledge and how we are gaining the wealth that God has placed into our care so what do I mean never invest in something you don't understand how what do I have to understand OK Couple points number one how does this investment make money if you can explain that point you don't understand what this investment is about number two how can it lose money this is the one nobody wants to talk about everyone who talks about investments they always talk about oh yeah this thing can get one hundred percent return or thousand percent return no one ever talks about when people crash and burn and lose everything number three what are the costs involved and number four What are the rules and regulations so in any investment you have to be able to answer these four questions at minimum in order for you to say I understand so let's say but point as an example how does Bitcoin make money can you explain that. How does it lose money everybody seems to think that you know crypto currencies is so secure Well the block chain technology yes it is secure but. The exchanges are not and do you realize that as I know some of you might not even know a bit coin is which by the way means you don't understand so don't invest in it. If you don't know what it is. But your wallet Bitcoin and cryptocurrency wallet you have a what's called a private key and if you forget the private key you lose your money forever it can't be retrieved so if you misspell it by one character it's gone for ever and actually there are millions and millions of dollars worth of bitcoins sitting in people's digital wallets that can never ever ever be retrieved because they lost the password. Have you ever forgot a password Well guess what you know how to lose a bit coy. Not only that there are costs involved so what are the costs involved in big point people don't really understand this but there are transaction cost to using the bitcoin network and right now if you want to transfer Alysia dollar Bitcoin you know how much a transaction fees cost thirty to forty dollars is not exactly cheap in my book and then what are the rules and regulations this is a hot topic just this morning the new said that South Korea is cracking down on Bitcoin exchanges in their country China is outlaw that there are all sorts of things the I.R.S. is always looking at how the tax and there are no regulations really in this space so that means in one sense yeah there's a lot of money to be made by the enterprise individuals but on the other hand you're on your own. If you get caught doing something unsavory Well you're on your own so do you understand these things and you can apply this to any type of investment in a mutual fund bonds real estate what have you how does it make money how can it lose money meaning what's the risk involved talk more about risk in a minute what are the costs of doing business one of the taxes involved what are the rules and regulations. Do you understand and one more thing about Bitcoin if you don't understand what a block chain is you do not understand Bitcoin and if you don't know who said that Comodo is you do not understand that court and for those of you who totally didn't get that that was supposed to be a joke but if you did not get the joke you don't understand bitcoin that same point second you know different ways around it so everyone just don't pull your phone don't look up the motorway until later let's keep going so do you understand so some rules of thumb if something is too good to be true it probably is a story not related to Bitcoin but surprisingly similar couple months ago I had some friends from Asia contact me asking me some investment advice about this particular gold investment as they called it that they were interested and they had some friends who were going in and they said this thing is so secure they're getting something like sixty percent rate of return annually it's like five to eight percent every month and my friends already got all the principal back so they're saying hey you want to you want to jump in. And I thought oh that's interesting Golda and then they went on and said Oh and there is a referral bonus. Where if I recommend people and I have a down line all of a sudden I get bonuses for every person that gets signed up under me and you can get as much as I actually saw on this poll this company's website and as much as ten million dollars a year or something in bonuses and I'm like If that doesn't smell fishy to you. Something's wrong with your nose but I did a little bit of research and they were talking about it being a gold investment in fact in the end it was not a gold investment it's what they called Spot gold trading which is a type of foreign exchange or Forex where they're trading currencies and one of the currency in the pair that they were trading happen to be the price of gold so you're not buying gold you know investing in gold you're speculating on the price of gold and another currency but then as I dug a little deeper as it turns out that's actually not the kind of business they were in at all they were what's called a pyramid scheme where they were trying to get people to come in at the bottom of the pyramid so they can pay out the people at the top also called a Ponzi scheme and you know just the rule of thumb if it's too good to be true it probably is let me just give you something something that you can hang your hat on Warren Buffett is considered one of the greatest if not the greatest investor in human history and how did he get that incredible reputation he's been investing for about five decades and he has an annualized annual rate of return of only and I say this in quotes only nineteen or twenty percent and he is like in the vestment world he's like a god you understand Warren Buffett everybody knows him and so this company is like we can guarantee you triple Warren Buffett's annual rate of return now you tell me is that is that likely to be the case. Does that sound too good to be true yes and so I wrote a blog post about this thing and I posted it and then the next day the website went dark so their website not mine and so they. And as it turns out my friends trying to get their money out and they're like well you can you have to wait six months now to wait nine months oh you can only get seventy percent back and it's like. You can kiss that money goodbye if it's too good to be true it probably is just a reminder you remember Bernie made off. What a ironic name right Bernie who made off with everyone's money largest Ponzi scheme ever in history and you know what rate of return he was promising people ten to fifteen percent that's it and it was the largest Ponzi scheme in history and that does not sound too good to be true that sounded fairly reasonable and that's probably why he got away with it for so long second rule of thumb about understanding simplicity trumps complexity complexity is something that is simpler is going to be better than complex something that's complex it may not mean that the simpler option has a higher rate of return that may not be the case but it might more likely means you're not going to get caught up in some scheme that you don't understand you're going to make a mistake and do something that you don't understand and I'm going to inject a little bit a big point in here too is that Bitcoin is not that simple if you can't fully understand it and explain it in an elevator pitch in thirty seconds then you're you're doing pretty good but in general terms and I've actually looked into this just buying Bitcoin trading it in and out of your account and transaction fees and being able to manage a block chain and all that it's not that simple for the general population. If you don't understand walk away but my friends made like a million dollars in bitcoin Do you understand that if you do not understand who cares if your friends made a million dollars walk away it's not worth it never invest in something you don't understand because guess what your friend is never going to tell you when they lose their house. You just don't hear those stories All right trying to keep you safe here guys number two be mindful of costs and taxes OK this is actually part of number one but it's so important to split this out the rule of thumb is and this is according to most research on investments all things being equal an investment with lower costs predicts higher returns lower cost investments be higher cost investments as a general rule so you want to look for something that is cheap and cheap in the good sense compound in costs meaning annual expense and taxes will negate compound interest and higher returns and you want to be aware of high broker fees commissions hin transaction costs that all kind of come out of your returns and that's the same thing you know we we have to remember that when it comes to crypto currency particularly Bitcoin transaction costs are hit infrequently and they are very massive right now and you want to use tax sheltered accounts to help shelter you from tax around occasion so here are a few of the more common with tax sheltered accounts under retirement there's a four one four three B. Those are employer retirement accounts usually there's a match involved there is an IRA in the Roth IRA These are for individuals they're all tax sheltered either pretax opposed tax there's college savings the five twenty nine or the education savings account and then there's a health savings account which I talked about in the previous seminar session I'm not going to bore you with taxable and nontaxable accounts except to say. If you have the option of getting a match on Your Money with Your four A one K. a four three B. take the match there is no such thing as a risk free investment but the match is about the closest thing there is because let's say you your your employer matches you five percent dollar for dollar for the first five percent of your income that goes into the four one K. you put your five percent in if they instantly match you five percent what rate of return did you just get one hundred percent people you put in five percent of your money less is five hundred dollars they match you dollar for dollar you just got another five hundred dollars. If you don't take the match I will slap you. So take the match it's about the only thing in this world that you can call free money all right number three this is a good one we got a beat inflation cake beat inflation back to the story of talents the wicked servant didn't lose the talent he simply failed to grow it you remember this in the story he actually was excellent in preserving the capital he didn't lose it he buried it he didn't just bury it he wrapped in the captain he was very good at protecting the master's capital but. Was he blessed Was he condemned. Inflation erodes purchasing power you all know how inflation works ten dollars today is a lot less than ten dollars twenty years ago and so to not beat inflation means that the value of the money that we are holding is going down the purchasing power is going down so to not being inflation is worse than burying our town we're losing the master's money so what should we do about it. So what rate of return did these servants get on their capital the faithful servants they doubled their talents which is a hundred percent total return so they double their money hundred percent the question is how long did it take for them to accomplish this we're not told exactly but the Bible does say in the parable that the master return after a long time so this is helpful because we are not told that they doubled their money overnight it took a long time. So I want to figure out to the best of my ability what was their annual rate of return in order to double their money and I want to know how to what was their annual rate of return to double their money with an approximate three percent annual inflation rate Why do I pick three percent because that's been the and average inflation here in the United States for about the past hundred years so based on historical data and you inflation approximately three percent what do they have to earn on their money year after year in or to double their money well I made a little chart so on this this column here we took a look at the years ten years fifteen years twenty years we're not told how long so I just picked three numbers but you'll see the trend so how much what's the rate of return that they would need to double their money with inflation calculated in ten years approximately ten percent ten percent rate of return what fifteen years approximately eight percent twenty years six and a half percent and you see the trend the longer it goes if it's twenty five years it will go down by about five and a half percent twenty thirty years it will be even less than that so you might be looking at these numbers and some of you might be thinking wow that's a lot because my bank gives me maybe half a percent point four percent or something like that that's a lot maybe that's what you're thinking but then other people might be thinking wow that's not much at all because Bitcoin just this year went up fifteen hundred percent. Well let me give you some context and S. and P. five hundred index fund which is a low cost broadly diversified mutual fund that tracks the S. and P. five hundred Index it's available in most people's four hundred one K.'s it's available in almost all IRAs it's a very common then commonly available investment type over the past forty years guess what the rate of return was somewhere right between ten eight and ten percent. So eight in ten percent is not with is something that is fairly reasonably within the reach of most normal human beings is what I'm saying but this only works over the long term none of these investments guarantee eight to ten percent in any given year but averaged out over a long period of time which is what we're talking about the master was gone for a long time that kind of investment return eight to ten percent is still considered relatively reasonable we do not need to be chasing hundred thousand fifty thousand percent rates of return which is what really is going on in the cryptocurrency craze right now. For number four so the previous point we need to beat inflation OK we have to beat inflation and how by how much well it depends how long you're looking at anywhere from six eight ten percent somewhere in there number four diversify Ecclesiastes is eleven verse two tells us give give a portion to seven or even to eight for you know not what disaster may come on the earth we use this verse and we talk to insurance but it also applies to investing because there's also investment risk we want to diversify investments and how do we do that we split up by diversifying it or put it in another words don't put all your eggs in one basket common sense but how does it actually work so if you are a employee in the business and you get stock options in that business and that's your only investment guess what you are not diversified because you are all your eggs in the one basket of that one company if you lose your job and the camp company goes bankrupt guess what your done so what do you want to do you want to take invest and spread it out you might have some in that company maybe you have some bonds you have some in cash maybe have real estate land diversified between different areas but even then for Adventists real estate is one of the most popular Adventists investments suppose you had. Investment property beautiful beach front property let's say you have five of them wow but they're all on the island of Puerto Rico. Than you're not terribly well diversified right at the moment are you. So even within the context of real estate yes multiple properties Yeah that's good but if you're all of them on the sand interest fault line you might have some problems so you're going to want to think geographically different asset types and. More than one. Location and different places so there are a lot of different types of investment a bill that in for your mutual funds is a common one index fund as I talked about earlier but the principle here is don't put all your eggs in one basket we're going to talk a little bit more about and diversification as we talk about the fifth point here the fifth principle is know your risk tolerance. How do you feel when you see this picture. That some people look at a rollercoaster like this and they feel exhilaration like let's go other people like Don't get me anywhere near that like I'm getting dizzy just looking at the picture well what about this roller coaster. There's different levels of feelings right some people look at a real roller coaster and they feel exuberance others feel fear some people look at this kind of roller coaster and people think oh no my portfolio is going down other people are thinking yes everything is going on sale. How would you feel right that's your feeling here is indicative of something called your internal risk meter all of us have something inside of us that tells us I'm not comfortable with that it's a meter that measures our risk tolerance and so we need to understand that risk meter and tune it and it has to coincide with our investment choices because there's always risk involved in investments so how do we tune this risky to understand four things number one our investment time horizon this is probably the most important the longer time you have the more risk you can take on why is that because the longer time you have if your investments go down in value you have more time to pick it back up and you have more time to buy more right when investments are lower so in general that means older people can take on less risk than younger people generally speaking but it really has to deal with what the money is intended for Generally we when we say that we talk about retirement but let's say you have a child and they're ready getting ready to go to college in five six years while your investment time horizon is a lot shorter than a twenty five thirty year retirement down the road so for the money that you need sooner you can't take as much risk on. Number two what's your level of knowledge again this goes right back to never invest in something you don't understand but the more knowledge you have in a particular area the lower the risk is for you so let's say you're a real estate developer or you can invest and take more risk in real estate investments than someone who has no idea how to swing a hammer no idea what real estate is all about so your personal knowledge is critical to understand and so some people you know maybe they know a little bit more about crypto currencies than others certainly there are people like that and perhaps they can mitigate the risk because of their personal knowledge number three. Do you have other assets other income streams this is a fact of diversification if you've got Social Security coming in and able to live pretty comfortably on Social Security guess what you can take a little bit more risk with your other investments or if you have other assets side income other types of things that can support you in the event that this one investment that you're focusing on tanks you're not going to completely up the creek without a paddle so you want to really understand if I am entirely dependent on this investment portfolio for my livelihood you cannot take as much risk on it and the number for personal risk appetite or versions of this is a personality factor some people would love to jump out of an airplane with a parachute but other people don't really even want to get in an airplane now for many of us particular for those of us who are married God has sort of built this into the marriage relationship where there are checks and balances right husband and wife many times there are different levels of risk tolerance and you have to understand what those tolerances are within your relationship or you might run into some conflict the husband might be like you know let's go all Lou I'm going to mortgage the house I want to sell the boat I'm going to sell the kids to go all in on this investment and the wife is like now now honey sit down no so you're going to have to discuss between you and generally speaking that's how you keep the family firm afloat you have some risk aversion with someone who's a little bit more risky working together in tandem that's a whole marriage seminar I think someone else probably is doing that seven hour you'll go there to figure that out but all I'm saying here is you need to listen to one another and have a family agreement on the amount of risk that makes people comfortable so you know you've got to understand your risk tolerance so risk in returns we have to understand that all investments have risk all of them and so the rule of thumb is that it is also proportional so the higher the returns the higher the risk you just have to remember that something that we turns one percent like a savings account relatively safe very safe whereas Bitcoin on the other hand fifteen hundred percent. You can also proportionally dial up the risk proportionally to that rate of return now even more significant I have to mention this is that debt magnifies the risk even more a lot of people they trade or they invest using what's called margin or leverage and I'm hearing news reports of people mortgaging their homes and putting it all into Bitcoin guess what that's a recipe to be living out on the street because death magnifies the risk because not only will you lose that investment you have to pay back the money that you owe with interest guess what not smart not smart So diversify your risk let me just give you another example so. Short term and long term risk OK let me just give you this example of something real practical you can do right now savings accounts U.S. Treasury bonds money market fund these are what we consider generally speaking low risk their low interest but low risk the f.d.i.c and short some of them or the bonds are backed by the full faith and credit of the U.S. government so in the short term something less than five years those investments are very safe they're not going to go down in value they're not going anywhere however in the long term more than five years they're very high risk in the sense that it's going to lag the really rate of inflation we talk about inflation just a moment ago and we have to remember if we keep all of our money in our savings account in ten years that money is not going to be keeping up with the rate of inflation and that's called burying our talent in the ground so what are we going to do so we see here in the long term or in the short term things like the stock market real estate land and there are other types of investments I could go here the very high risk in the short term they can go up they can go down they can lose a lot of value overnight but in the long term historically speaking the stock market real estate land they beat inflation. And they're considered low risk for the long term So what do we do. We want to diversify our risk so any money that we need within the short term and put it into these low risk accounts insured accounts bonds money market and the long term money that we don't need five years a lot longer in the future those are the things that we can invest in higher risk and higher return type investments so the rule of thumb is to say for the short term five years or less and invest for the long term things that over five years all right. So that. Is a little bit of diversification now number six Don't try to get rich quick Don't be greedy and don't speculate art dawdle says wealth gain hastily will dwindle but whoever gathers a little by little will increase it problems thirteen eleven Proverbs twenty eight twenty says a faithful man will abound with blessings but whoever hastens to be rich will not go on punished so I need to tell you the story of tulip mania if you come back with me in history to the sixteen hundreds Netherlands Holland there was a creed. Over to. These beautiful flowers and these bulbs somehow became a hotly desired commodity and people started buying up to us and bidding up the price. And it became a bubble as we call it in tulip mania at the peak of tulip mania the price of tulips were going up as much as eleven hundred percent a month. And at the peak of it one exotic. Ball just one flower ball could sell for as much as ten times the annual salary of a middle class man. So let's say the US median income is fifty thousand today back then one tulip bulb could be selling for half a million dollars Not only that they began to create derivative financial instruments to trade to speculate on the price of tulips so they'll be have options contracts that have future contracts and they would have to give you an example of what that might mean there would be a contract written up with a farmer you have an acre of tulips I'm going to buy the contract right when I sign a contract for a thousand dollars saying they take that contract which is a derivative you're not even buying that too it is simply the promise of the promissory note that you can one day buy that plot of tulips go to the market and say who's the highest bidder Oh I'll pay two thousand for that up to four thousand for that I'll pay ten thousand for that and people would buy it and the flip it around to sell for ten times more the next day or whatever and the became a bubble because people were making speculative decisions on the price of tulips continuing to go up so as all bubbles go eventually it popped and the entire Dutch economy came grinding to a standstill and you might be thinking whoa I would never do that with two loops. When you remember two thousand and eight. There was a bubble and the bubble was in housing and then you remember in the late ninety's there was a there was a bubble in dot com companies and you know I hear about something these days that have been going up thousands of dollars in room and review in returns and people are creating derivative financial instruments about them betting on their prices and speculating it sounds a little bit like Bitcoin doesn't it. Well tulip mania and Bitcoin have a lot in common I must say so let's continue here and let's we need to we need to drill down a little bit so we don't want to speculate we don't want to become a tool of maniac we don't want to fall into that trap of just feeding into the bubble we don't want to speculate we want to be an investor so what's the difference between speculating and investing So here are a few things to help us guide our thinking about what is speculating and what is investing speculating is hoping for quick riches getting rich quick is the goal whereas investing is patient and steady for the long term the motive in speculating is to get rich whereas in investing the motive is to meet the needs speculating is based on arbitrary price movement whereas investing is based on the expected productivity of an asset that is a critical critical point Warren Buffett once said and it took me awhile to understand really what he was saying Warren Buffett once said when he is buying a business a stock in a company or a business he buys the business with the anticipation that the stock market is going to shut down tomorrow and not open for five to ten years. Because he doesn't care about the price of the stock if you care about the price of the asset and whether it's going up or down chances are you're speculating so what does what does Warren Buffett look at he looks at the business is it creating value for their customers does it have positive cash flow those that pay a good dividend is it does it have an economic advantage that is sustainable over the long term does it have good management this is what he's looking at the expected product to Vittie of an asset so using the example of tulips anything wrong with tulips. No it is tulip farming and having a tulip flower shop is that a legitimate business Yes So the problem was not in the tulips right the problem were in the speculators So a speculator looks at the two in a second I wonder how much I can sell this for like what who is the biggest sucker who is going to buy this at a higher price than I paid whereas of tulip investor would look at look at it this way they will look at the farm and say if I were to become a shareholder in this business and I gave it some capital if i gave us some extra you know management expertise. How can we improve the quality of the product raise the prices sell to a wider market maybe we can improve our productivity by being nicer to our employees giving them a better work environment and as a result the business grows in an organic way because it provides more value the business is actually generating something whereas what was happening back then into a mania they don't even care about the tulips it could have you could exchange it for anything it might not have been tulips maybe it would have been daisies maybe it would have been a Tickle Me Elmo I don't know it's the same concept when we think about every bubble so the question that is being asked with speculating is what is the price what's the price I can buy it for and what's the price I can sell it for that's what the speculator cares about and investor says what's the value what benefit is this generating for humanity for the marketplace what is the value and so when we think about Bitcoin ask yourself these questions are you trying to get rich quick ninety nine percent of people investing in crypto currencies that is entirely the reason motive is to get rich is it based on arbitrary price movement while you have what is the price what that's the only question that's being asked frequently now you might be thinking oh you're being so hard on bit because you know you don't really understand it so let me back up a little bit let me give it a little bit of a fair shake so Bitcoin right now is what's in the news but Bitcoin is not the only crypto currency that's in existence there are like thousands of them and Bitcoin and all these crypto currencies are built on what's called the block chain technology and I will say from my research that block chain technology is is legit OK It is a real thing block chain is here to stay and it is not it's not fake but the price action of the crypto currencies and big point in particular I believe has to be separated in our minds from the underlying technology All right so let me give you an analogy of how I see this back in the one nine hundred ninety S. late ninety's and early two thousand there was the dot com bubble some of you might remember that. Everyone anyone heard of Pets dot com Pets dot com Does this still exist it has three hundred million dollars valuation within two weeks it was zero during the got dot com bubble burst but also during the dot com bubble there was a company called Amazon dot com Anyone heard of Amazon is a still around so what am I saying the dot com bubble was built on speculators speculating on companies that had dot com in their name it does not say it has nothing to do with the underlying technology of the Internet the Internet is still valuable incredibly valuable but because of the speculation in the dot com businesses it became an unsustainable bubble even though within the bubble there are companies that are legitimate that are still with us today. So the best analogy I can give with the crypto currency craze right now is that it looks like a bubble it smells like a bubble it moves like a bubble people are frothing at the mouth like a bubble so it's probably a bubble but within the bubble we have to understand that the Bitcoin or the block chain technology underneath very well could be someday something very significant is that fair I mean some of you might be like I don't have any idea what you're talking about let's go on but for those of you who are here for the whole Bitcoin bit I feel like I have to give you that because I don't want you to walk out and say That guy is ignorant he doesn't know anything I don't know much but I do know this and that is that block chain is different then speculation in bitcoin we got to skip those things separate someday down the road and might be very soon down the road we very well might be in a day and age where block chain is as pervasive as the internet it is very possible but does that mean that now is the time to just jump on the hype train and just speculate away in and jump in the bubble of Bitcoin I don't believe so OK so maybe someday there might be a safe way of investing in the underlying technology of cryptocurrency maybe but as of right now I don't know of an easy safe regulated you know cost effective way to do that so I'll give you that crypto currency is not all Bat don't call me a block chain hater I actually love the block chain I'm just not a big fan of speculating in bitcoin at the moment is that clear I meant. One person said a man just I just move on you guys are getting bored All right number seven value your time all right so investing we also takes our time and your money should be working for you not you working some more for your money we understand that we have better things to do with our time we had to R.C. we're going to be talking about reaching souls and winning souls for Jesus we need to have our money and they building us to spend more of our time doing that not just being tied up more to work for a money issue to be another job and our time is also talent improve for the Lord so day trading it could be trading currencies Kryptos or it could be day trading stocks I don't really consider that investing that's more of a side job or side hobby. And also mention this now that I've offended some people maybe i just for the rest of you multilevel marketing is not an investment. It is a side business it is a side job so don't get this notion that oh Mithun multilevel marketing going to earn a bunch of money what you might but you have to work at it so I don't consider it an investment it's like a side job a side hobby or whatnot because we have to remember our time is also talent to improve for the Lord so value time in your investments money is a very excellent servant but a terrible master P.T. Barnum once said Number eight we need to have an exit strategy and that means we need to consider that liquidity of our investments Why do I say that councils are stupid fifty nine paragraph four 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 same should cut loose from every incumbent before the time of trouble comes and make a covenant with God through sacrifice if they have the property on the altar and in earnestly inquire of golfer duty if you will teach them when to dispose of these things then they will be free in the time of trouble and have no claws to weigh them down continuing page sixty paragraph two 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 the time of need then as a cause needs it their duty is to sell them long passage let's summarize what we just read. It is the will of God The same should cut loose from every. Encumbrance before the time of trouble meaning all of our property all of our investments all of our assets there will come a time when God says Sell everything liquid. God does not require all of his people to dispose of the property at the same time a lot of times people do like I wish it was like this sign in the sky is the son in law or is it some other thing that once this happens everyone sell everything well guess what that's not how it works because just think a logically think logically with me if it was that way and all of God's people sell everything all of the same time guess what there's no one left to administer the funds for God's work because everyone just sold everything so the fact of the matter is God is not saying let's hold on to your assistant to the last possible moment that's not how it works God is going to tell people one by one now is the time for you to sell now is the time for you to sell now the time for you to sell so there's a constant stream constant stream going to the wall into the work of God until the work is finished so some people just like we just read some people God said you should sell everything right now long ago maybe some people today some people might be tomorrow some people might be later I don't know OK But when when do we sell Number three inquire of God for duty and he will teach you when to so it's not for me to tell you I don't know God will tell you it's an individual decision we have to be in tune with the Lord and we so that means in the meantime we need to consider the liquidity of our investments so whatever we're investing in we need to understand how do I liquidate when the time comes we need to have a path and also if we have a big portfolio we've got a lot of different things we need to balance it out so we can start selling chunks of it instead of having everything locked up for a long period of time I've been talking about Kryptos list finish up with bitcoin a little bit a lot of people assume because it's just liquid because it's like digital cash Well guess what when a lot of people are trying to sell out of the market all the exchanges shut down and your money is stuck there and the stuck there until you are you know the Bitcoin goes down fifty percent in value so yes in a sense fear radically speaking the technology should enable because to be very liquid that's the ideal but in reality the way it is right now it's not and sometimes a big contraction may take a week or more to go through of course this doesn't necessarily apply to some of the other crypto is but Bitcoin in particular so we do have to understand that even the liquidity of Bitcoin is a factor but all of our investments if it's land it's property if it's business whatever it might be will it take three months will take six months unravel these things if the Lord moves upon you to sell you have to keep those things in mind and understand what your exit strategy is OK Point Number nine morality so Principle Number nine you have to think about the investment the morality of our investments so first Corinthians ten thirty one whether therefore you eat or drink or whatsoever you do do all to the glory of God So there are two pervasive perspectives on ethical investing. The first one is that we should avoid investments that are directly involved with unethical products and industries I think we agree with that but the second one takes the step further we should avoid investments in anything companies mutual funds etc that contain even an indirect or incidental interest in any product or industry that would deem an ethical So this is number two I think we would say would be ideal but the question is Is it realistic is it a tenable position to adopt to have financial interactions with businesses that not only in the of themselves are morally pure but their indirect like their down line right like if I go to a bank and I'm doing business with a bank is can I be sure that that bank is not loaning money out to someone who's doing something that I don't agree with is that possible another Another example is OK let's invest in the Cosco Cosco family friendly good business well guess what COSCO is the number one alcohol retailer in the world so does that mean Costco is an inappropriate investment for me as a Christian These are questions to ask so my my my dilemma here is yes Number two having all indirect incidental affiliations be morally pure I think that's ideal. But I don't believe that it is number one ten the bowl and number two I don't believe it is required by scripture so let me show you some Bible verses here first Corinthians five years as nine and ten Paul writing I wrote to you in my letter not to associate with sexually immoral people POS. Not at all meaning the people of this world who are immoral or the greedy and swindlers or idolaters in that case you would have to leave this world so you see what Paul is saying policy and do not assume it was sexually immoral people what's assumed here is in the church don't countenance open sin in the church but in the world in the market place because you talk about the greedy and the swindler's that's talking about economic activity in the marketplace when you're interacting with with the heathen with the Gentiles this is an untenable standard for us to have because the only way for us to have that level of moral purity is we have to leave this world Paul says of himself Matthew five verse forty three and forty five for he God makes the sun to rise on the evil and on the good and sends rain on the just and on the unjust so if we are taking the moral position of saying we are morally culpable for the sin that's done not just in our direct interactions but in their secondary and tertiary indirect affiliations then what we're saying is God ultimately is morally culpable for every sin evil act that happens under the sun why because God sends the rain on the just and the unjust so that's a moral standard if we are making that the rule that even God himself cannot be helped to. So this is what I mean when I say in our financial interactions whether as a customer whether as a partner whether as a business person whether as an employee or as an investor it is not realistic to expect one hundred percent of our secondary and tertiary affiliations through our business interactions to be morally pure That's my position based on some of these verses Now if you want more information I actually wrote a three part article series on my blog on the subject specifically dealing with mutual funds because that's where the question came up is it OK to invest in mutual funds because I'm not sure what they're all in there and this is part of what I discussed in there so the moral application is just this number one we need to recognize what Scripture does and doesn't require of us and don't create a moral rule beyond what God requires that we need to be careful not to do that but number two we need to make sure all of our direct interactions are morally pure and that we are following God's clearly revealed will so in our investments I do not recommend people investing in Budweiser or moral or whatever you know other. Companies that are dealing with immoral stuff. But if I'm doing business with a bank and I find out that moral Borel happens to have also a bank account with that bank and they're getting paid interest and I'm affiliated with this bank I'm not going to sweat that you know what I'm saying even though you know if you choose to move your business somewhere else I'm not going to say don't do that but in that particular situation I'm not going to lose sleep over it and just like you know going to shop at Costco or whatever up yet they sell alcohol Costco they sell alcohol in a lot of places but that doesn't keep me from doing business with that retailer OK based on what I'm seeing here so number three do our best with the remaining indirect interactions and recognizing that we live in an imperfect and sinful world and that we should not neglect major duties while quibbling over minor matters to not strain at a gnat and swallow a camel just a couple last year actually I was at a convention and I was sharing some of this and one person says Oh you invest in mutual funds you better person don't you know stocks are evil and other though he just went on and on and on in public in front of everyone and I'm like OK that's nice and then afterwards he came up and he's like oh have you heard about cryptocurrency. He said if I just put in this much you know it's going to go boom and I'll be retarded and I'll be set and I'm like wait a minute. Have you heard of the Silk Road Have you heard about Bitcoin being used for illegal activities if you have a problem with these businesses why do you not have a problem with this over here I'm not necessarily this person is you know a bad person but there's a inconsistency in this thinking is all I'm saying so when we're thinking through these things we have to have a moral framework in which we're not going to be so guilt ridden that we're just losing sleep because oh no my money is in a bank that has no business with other people that I don't agree with moral paralysis can set it so do the best we can make the best choices with options available to us but understand what God does and does not require so you can read more about this on the blog in my article we need to keep going dude on a fifteen six six lend on to many nations and just as an incidental note. By definition all of the nations are heathen nations so Israel could have God could have kept all the investment dollars within Israel but God's ideal was no I want you to interact with other nations lead to them which is a form of the investment by the way so it seems as though God does not necessarily say don't have any financial involvement with non Christians number ten start now Principle Number ten for investing start now thrifty to spend the selling They are both the same age Tiffany decides to save two thousand dollars a year from age twenty to thirty for ten years invested at eight percent rate of return so she invest twenty thousand dollars over ten years of her own money Sallie on the other hand she says I'm young I'm going to wait till I'm married settled have kids whatever at age thirty I'll start investing then I'll catch up two thousand dollars a year from age thirty to sixty five she invests also eight percent return and she invests seventy thousand dollars of her own money over thirty five years so you see the contrast there they start the same age they start investing at different times one invest more money over a longer period of time than the other at age sixty five when they retire who has more money. Or so to give it away in the way I named them in the time but let's take a look at the numbers at a sixty five Tiffany will have half a million dollars whereas Sally will only have three hundred eighty thousand that's one hundred twenty thousand dollars difference it's no chump change but Tiffany saved a lot less and for a shorter period of time and Sallie how does how is this possible the only difference was she started earlier is because of compound interest and here's a graph she has a ten year running Head Start and compound interest you remember in high school algebra is interest that earns interest on itself it keeps growing compound ing and so the growth chart here is not a straight line it becomes an exponential curve and so Tiffany has a running start and as the compound interest picks up even though Sally is adding at a rate of two thousand dollars more a year she never catches up to Tiffany So the principle is just this the best time to plant a tree was twenty years ago the second best time is now. Don't wait don't want to have a bunch big pile of money it's better to invest a little bit earlier rather than investing a lot later and we read a quote earlier today Ellen White recommending her young nephew even in your meager or limited wages you can save a little bit and invest it in something that gains in value Ellen like yourself so that So how do we determine investments we come up with an investment scorecard and we have nine points total and this is what we used to evaluate Do I understand this investment the four things we need to understand can it beat inflation if it doesn't beat inflation it's not really a legit form of inflation of investment because were burying the talent is it a low cost investment is it diversified is a non speculative how much time does it take to manage is an acceptable amount of risk how liquid is it how easy it is to liquidate and can I have a clear moral picture of all of its direct and indirect involvement so since I've been talking about Bitcoin Let's close on that my Bitcoin score card this is what it looks like Do I understand now I have to be honest I feel like I have a fairly reasonable grasp on Bitcoin but I do not feel like I understand it well enough to really say confidently that I understand and I'm I'm not the smartest person in the world but I don't think I'm the dollars pencil in the box either. And I'm just being honest with you it's not that simple Bitcoin and crypto currencies in general cannot beat inflation yes I believe it's shown that it can can it crash and lose a lot of money below inflation Yeah I can do that too is a low cost I don't believe it is right now maybe some crypto currencies are is a diversified Well not really is it not speculative this is the big one. It is a it is like the definition of speculation currently OK but corn itself not necessarily block changing technology necessarily how much time does it take man it actually takes a lot of time you have to exchange back and forth with different financial exchanges and it takes forever to get your feet up currency in and out acceptable amount of risk Well not for me I'm not into skydiving and Bitcoin is the equivalent of financial skydiving right now liquidity Well I mentioned it earlier it's actually not super liquid it's hard to get your money out in a in a big rush and then is there complete more clarity Well Bitcoin that's one of the big things that's been used for a lot of money laundering type things criminal activities it's not it's not clear so for me it scores one out of nine OK So to me because it is not that great of an investment now I'm going to end on this point. Some of you are going to take this and you're not going to listen to anything that I say you're going to vest in it anyway. So to use this is what I'm going to say be exceedingly careful not to put more than one or two percent of your investment portfolio into cryptocurrency if it does explode as you think it is which is how most people think about it one or two percent should be more than enough to make you millionaire right back but if it's one or two percent at least you're not going to lose your shirt if it crashes and burns All right so this is this is sort of my my backup like if you're not going to listen to me anyway at least hear me out on this point don't mortgage your house to go into Kryptos don't sell a kidney to buy Bitcoin dull sell your children be be exceedingly careful So this is my big going to score card here the financial investment tips and I have gone way over time I am so sorry I didn't know what time was what let's close let's pray Father in heaven thank you so much for being with us this hour as we discuss these things I hope it has been practical you work on the hearts of the young people here as they make careful decisions about their money and may they do it all for your name's glory and honor we praise Jesus name. This message was recorded at the G Y C twenty seventeen conference arrives in Phoenix Arizona. It's a pretty Ministry of the Seventh Day Adventist Church seeks to inspire young people to be bible beast Christ centered and so many Christians to download were purchased other resources like this visit us online and Deb You don't need Deb you die I see Web dot org.

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