Solomon’s Guide to Investing

money treeWhat are the keys to being a successful investor? Though in this space we often focus on debt, I stumbled across these investing principles that are too valuable to miss. I’ve read many, many investing and personal finance books, so when I came across Ecclesiastes 11:1-6 last night in my reading the passage opened up like a cliff notes of recognizable, key financial concepts. Here they are:

  1. GIVE and SOW First

Verse 1: “Cast your bread upon the waters, for after many days you will find it again.”

I just finished reading “The Blessed Life”, and it impacted me in some major ways. The principle of ‘first-fruits’ is interlaced throughout the scriptures. The idea of sowing BEFORE you know the result of the harvest is critical. The concept of ‘first-fruits’ says that you give the first part of the harvest BEFORE you know the full bounty of the harvest. Additionally, in the Hebrew law it says you are to consecrate the firstborn (Ex 13:2) BEFORE you know how many total children you’ll have. We also see this in Jesus when God GAVE his firstborn (John 3:16) before we could respond. That’s the power of Romans 5 “But God demonstrates his own love for us in this: While we were still sinners, Christ died for us”.

In secular financial arenas there is a principle called “Pay Yourself First”. That is, if your financial security and saving money are your biggest financial priorities, you have to set aside money BEFORE you pay your bills, spend elsewhere, etc. This is a principle taken straight from scripture with the beneficiary switched. The scriptures teach that rather than our own security, we are commanded to seek FIRST the kingdom of God and all other things will be added unto us.

The commentaries on “casting your bread upon the waters” give a couple of helpful hints at connecting and applying this scripture:

  • “Bread” represents that which is necessary for life.
  • You have to release it yourself. Nobody can do it for you. In doing so it changes your heart and motivations. This is represented as a calculated decision.
  • The “upon the waters” indicates a flowing river or open ocean – meaning it needs to be cast under the assumption it isn’t ever coming back. Your motivation for giving cannot be to receive.
  • When you give or sow, you ‘lend to God’ (Proverbs 19:17) and God will reward you. “Whoever is kind to the poor lends to the LORD, and he will reward them for what they have done.” That’s why “The generous will prosper; those who refresh others will themselves be refreshed” (Proverbs 11:25). Even though this is true, reward shouldn’t be our motivation. Jesus taught his disciples to lend without expectation of return (Luke 6:35).

It doesn’t matter how much you sow (two mites is a start), but the principle here is that you can’t stand in a field waiting for a harvest before you start giving and sowing. Put first things first. I think it’s critical that this is the first verse in this passage.

  1. DIVERSIFY

Verse 2: “Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.”

This financial principle has been widely accepted as the only way to weather the ups and downs of the financial markets. Four times throughout these six verses the phrase “for you do not know” is used. Diversification acknowledges that unknown market conditions will cause some business sectors (agriculture, commodities, small businesses, real estate, etc.) or geographic sectors to thrive or struggle.

  1. IT IS WHAT IT IS

Verse 3: “If clouds are full of water, they pour rain upon the earth. Whether a tree falls to the south or to the north, in the place where it falls, there it will lie.”

A successful investor realizes that bad things happen. They are a part of life. As Forrest Gump acknowledged when it was pointed out that he had stepped into poop, “It Happens”. In fact, despite our greatest efforts of engineering it, life itself is uncertain.

The reality is that all successful people and investors have had failures. Human nature (often inflated by social media) causes a lot of pretending one way or the other – either people pretend they are failure proof and everything is fantastic all the time or others glorify their failures. A healthier perspective acknowledges the failure for what it is, gleans what can be learned from it, and doesn’t let it affect my intrinsic value as a person.

I have a close friend who owned over 20 rental homes. When the market collapsed in 2008 his bank called his note due, even though he had never missed a payment. He lost all of those houses in a two year long process as his bank went into receivership.

The reality is that failure (ours or others) is the number one teacher in life. We need to remove the stigma and realize that if a tree falls on your house, it is done. It can’t be undone any more than you can make the rain go back into a cloud. Accept it, and move on. That’s why the same author pointed out “for though the righteous fall seven times, they rise again, but the wicked stumble when calamity strikes”. As many others have pointed out, character is measured by the getting up, not the falling down. The friend I mentioned in the previous paragraph went on to start a small business and now, 5 years later, he has several locations, a couple dozen employees and several million dollars in gross revenue.

  1. DOLLAR COST AVERAGE

Verse 4: “Whoever watches the wind will not plant; whoever looks at the clouds will not reap.”

When people call in to discuss their financial problems with Dave Ramsey on the radio, they often comment that they are waiting to have kids until they can get on top of their financial problem. To Dave’s credit, I’ve never heard him endorse this. Instead, he points out this timeless truth: There is no perfect time for anything.

Inaction can be caused by fear or by laziness. Proverbs 22:13 says that a lazy man refuses to go outside because there is a lion or he might get murdered in the street. In a 24/7/365 news cycle there are often stories that use fear to drive viewership. But a prudent investor ignores the fear and panic of the day and uses a simple technique called “Dollar Cost Averaging”. Simply, if you invest at a steady pace over a long time, you’ll buy fewer investments when the prices are high and more when the prices are low. In doing so you’ll insulate yourself against some of the volatility that is inherent in any market. There is no perfect time for anything. As the old Chinese proverb says: The best time to plant a tree is twenty years ago. The second best time is now.

  1. NOBODY IS RIGHT ALL THE TIME

Verse 5: “As you do not know the path of the wind, or how the body is formed in a mother’s womb, so you cannot understand the work of God, the Maker of all things.”

In his book “MONEY Master the Game”, Tony Robbins interviews a dozen or so billionaires (that’s someone who has made a million dollars a 1000 times). One of Tony’s main takeaways is this: All of them quickly admit that they don’t know what’s going to happen in the future. In fact, they spend virtually all their time and intellectual energy NOT trying to predict markets and the future, but rather building a system or portfolio that can survive and profit from the greatest variety of fluctuations. As one interviewee stated, “Sometime in your lifetime your favorite investment (gold, real estate, stocks, etc) will go down in value by 50%”. It’s not if, but when.

The reality is there is a lot we don’t know or understand. This verse emphasizes twice that “you do not know” and “you cannot understand”. This needs to be built into any investor’s worldview from the beginning. This principle is emphasized at the end of verse 6 as well: You do not know which will succeed, whether this or that…

I’ve also heard a number of very successful entrepreneurs explain that all ideas have this in common: They seem great at the time. James Altucher, who has sold multiple businesses for 8 figures, has said and written many times that he started 6 or 7 business at the same time because he had no idea which of the ideas was any good. In fact, they all seemed great at the time. Verses 5 and 6 point out that we “do not know which will succeed”. This is a critical business principle.

  1. FINISH: CONTINUE TO WORK ALL THE WAY THROUGH HARVEST

Verse 6: “Sow your seed in the morning, and at evening let your hands not be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well.”

One commentary explained this verse as such: Do not be lazy; get up and be about your work. Also, do not quit half-way through the job. If the sowing in the morning happens not to take, then the sowing in the evening will. We must put out whatever effort is needed to succeed. We do the work, and it is God who prospers the effort.

Solomon explained it this way: The slacker is so lazy that he buries his hand in the bowl and he doesn’t even bring it back to his mouth. There is a season for every activity under heaven. Don’t quit early, work through the appointed time, and live with the results.

The world values success. God values process. The verse seems to indicate that if ‘both do equally well’ it isn’t because you were smarter, worked harder than your neighbor, were spiritually blessed or otherwise deserved success based on your merit. The point is to not “become weary in doing good”.

CONCLUSION

I believe the timeless truths of these investing principles will prevent you from ‘piercing yourself through with many sorrows’ and instead allow you to experience freedom from the anxiety and fear that often accompany investing.

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