Bibek Raj Pangeni | 15th May, 2021 |
Readers might need some faith in spirituality otherwise this article maybe just a waste of time. “Now faith is the substance of things hoped for, the evidence of things not seen. But people who aren’t spiritual can’t receive truths from God’s Spirit. It all sounds foolish to them and they can’t understand it, for only those who are spiritual can understand what the spirit means” – Scripture.
Since money plays a bigger role in our daily life- there is no way God won’t direct us to those matters. When I will be referring to investment I will be relating it with investment in the stock market. Here are few headings I will be talking about.
Corinthians 16:2 On the first day of every week, each one of you should set aside a sum of money in keeping with your income, saving it up, so that when I come no collections will have to be made.
Proverbs 21:20 The wise store up choice food and olive oil, but fools gulp theirs down.
Proverbs 6:6-8 Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.
Proverbs 13:11 Dishonest money dwindles away, but he who gathers money little by little makes it grow.
This guidance motivates us to be wise enough to save some money from our income. Saving is the first step in accumulating great wealth. Instead of dreaming about receiving millions of rupees, we should focus on saving little by little. People simply ignore the importance of savings and indulge in illegal ways to make a huge chunk of money and gamble in highly risky manners which might not be a great idea in the long run. According to The Richest Man in Babylon, “For every ten coins, thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul”. In simple language, pay yourself first by saving 10% of your earnings. P.S. All the proverbs used in this article are not regular proverbs in fact it is an interesting and knowledgeable chapter in the bible.
2. Poverty and Diligence
Proverbs 21:5 The plans of the diligent lead surely to abundance, but everyone who is hasty comes to poverty
Proverbs 14:23 In all toil there is profit, but mere talk tends only to poverty
Being diligent can get us blessings from god. We have seen how all the successful people in the world are now reaping the fruits of their hard work and effort. Warren Buffet always looks into the thousands of pages of the annual report and makes due diligence before buying any business. Elon musk used to sleep in the factory and had always worked hard for the growth of Tesla and his other associated company. In Benjamin Graham’s words, “If you are not willing to do all the hard work of looking into the annual reports of companies for past five years then maybe the stock market is not your place, it is better for you to choose another profession.”
Proverbs 27:23 Be diligent to know the state of your flocks and attend to your herds.
Proverbs 24:27 Prepare your work outside and make it ready for yourself in the field; afterward, then, build your house.
Luke 14:28 “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?
For preparation, you must do your due diligence. You must know the financial conditions of the company you are holding currently, its upcoming project, cash flow analysis, whether the management is good enough or not to run the business, its competitive advantage that can build a castle in their business to protect from the competitor and sustain for a long time, comparing with all the similar companies in the market to know its current position and trying to value the company. But, valuation doesn’t have an exact price in fact it varies from person to person and his approach but we can follow Benjamin Graham’s advice of buying with some Margin of Safety. So when our valuation becomes wrong, we still have a cushion for safety because we have bought the stocks low below their calculated value. Aswath Damodaran, the dean of valuation at the Stern School of Business at New York University and a current celebrity in the field of investment says that we must try to value all the stocks before buying them whether it is industrial companies or BFI’s or Technological Companies. This due diligence can provide some insights into the value of the company and we can use some margin of safety to buy those companies and we won’t be paying much to the company which reduces some risk associated with overpaying for those assets.
4. Recessions and Diversification
James 4:13-15 Now listen, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.” Why you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. Instead, you ought to say, “If it is the Lord’s will, we will live and do this or that.”
Ecclesiastes 11:1-6 Invest your money in foreign trade, and one of these days you will make a profit. Invest in seven ventures, yes, in eight because you never know what kind of bad luck you are going to have in this world. No matter which direction a tree falls, it will lie where it fell. When the clouds are full, it rains. If you wait until the wind and the weather are just right, you will never plant anything and never harvest anything. God made everything, and you can no more understand what he does than you understand how new life begins in the womb of a pregnant woman. Do your planting in the morning and in the evening, too. You never know whether it will all grow well or whether one planting will do better than the other.
Proverbs 22:7 “The rich rule over the poor, and the borrower is servant to the lender.”
Diversification is a great idea for reducing risk since the future comes with unlimited possibilities and the variable that controls the economy and business might not be in our hands. But over-diversification may not be a good idea for a great return. Knowing what you own helps to reduce risk and when you buy 100 stocks it is hard to track all those companies and you might be buying a mediocre business instead of high-quality businesses. It is always better to buy a company with much cash in hand than similar companies with less cash and with enough working capital. Leverage might be a great idea to scale your earnings but if the company has too much debt then it may come into trouble during recessions and finally might get bankrupted.
5. Bull Trap
Proverbs 27:12 The prudent see danger and take refuge, but the simple keep going and pay the penalty.
Proverb 1:22 “How long will you who are simple love your simple ways? How long will mockers delight in mockery and fools hate knowledge?
When Mr. Market is completely optimistic with its prices, most of the stocks might have been skyrocketed and during those times buying those stocks might not be a good idea and there might be a high probability of losing your investment. A single stroke in the economy or a piece of simple bad news in the economy may burst that bubbles. So during those times you need to be careful and might go with the flow to trade but you should have a proper strategy for entry and exit and strategy to minimize losses in case of burst in a bubble. When you see such irrational behavior of people and the overvaluation of all the company, this might be an opportunity to sell those stocks knowing the time to harvest what you have sowed had arrived. There is a saying that Bull makes a profit and bear makes a profit but the pigs are slaughtered. So these pigs might be the ones who arrived lastly at the bull market and who might have very little knowledge in the stock market. These pigs might be the simpler ones who have earned their money by selling milk, driving a taxi, teacher, etc. Just before the financial crisis in 2008, most of the taxi drivers in the USA had arrived late in the stock market and lost the must and there was a shortage in hiring employees since most people quit their job and made easy money by gambling in the stock market. When you notice similar situations around you then you should see danger and take refuge.
6. Corporate Social Responsibility (CSR)
Proverbs 3:9-10 Honor the LORD with your wealth, with the first fruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine.
Malachi 3:10-11 “Bring one-tenth of your income into the storehouse so that there may be food in my house. Test me in this way,” says the LORD of Armies. “See if I won’t open the windows of heaven for you and flood you with blessings. Then, for your sake, I will stop insects from eating [your crops]. They will not destroy the produce of your land. The vines in your fields will not lose their unripe grapes,” says the LORD of Armies.
Lately, CSR has been an emerging concept in Management. Almost all companies are separating 10% of their profit to help society and the environment. Management has now seen the importance of the well-being of society. The western country might have started this concept as part of their faith in God.
7. How to donate your money?
Matthew 6 “Be careful not to practice your righteousness in front of others to be seen by them. If you do, you will have no reward from your Father in heaven “So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by others. Truly I tell you, they have received their reward in full. But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you.
We can see how people share all their good deeds on Social Media. Recently, an Indian actor Sonu Sudh has been helping other needy people by announcing in all his social media accounts, reality shows and posting all his good deeds every week. It is good to know that he is helping others but it also might be to achieve popularity and meeting his own needs. But God is Strict in how we should donate our money. The verse do not let your left hand know what your right hand is doing so that your giving may be in secret prohibits us strictly to announce in public. God might be rebuking us because he knows that humans like to be honored by others and this stunt might bring pride and arrogance in us which will eventually poison our soul.
8. Paying Wages and Salary
James 5:1-6 Now listen, you rich people, weep and wail because of the misery that is coming on you. Your wealth has rotted, and moths have eaten your clothes. Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. You have condemned and murdered the innocent one, who was not opposing you.
Scripture strictly demands all the bosses to pay what is due to their employees and all the employees to work sincerely to their masters. Ephesians 6:5 and Colossians 3:22 – call on slaves to be obedient to their masters. “Bondservants, obey in everything those who are your earthly masters, not by way of eye service, as people-pleasers, but with sincerity of heart, fearing the Lord.
We can use both verses to solve the “agency problem” in corporate governance. Shareholders should provide appropriate compensation and motivational packages to the management and the management should never forget the objective of the corporation is the shareholder’s wealth maximization.
9. Inheritance of family Money
Proverbs 20:21 An inheritance claimed too soon will not be blessed at the end.
The Parable of the Lost Son Jesus continued: “There was a man who had two sons. The younger one said to his father, ‘Father, give me my share of the estate.’ So he divided his property between them. “Not long after that, the younger son got together all he had, set off for a distant country, and there squandered his wealth in wild living. After he had spent everything, there was a severe famine in that whole country, and he began to be in need. So he went and hired himself out to a citizen of that country, who sent him to his fields to feed pigs. He longed to fill his stomach with the pods that the pigs were eating, but no one gave him anything. “When he came to his senses, he said, ‘How many of my father’s hired servants have food to spare, and here I am starving to death! I will set out and go back to my father and say to him: Father, I have sinned against heaven and against you. I am no longer worthy to be called your son; make me like one of your hired servants.’ So he got up and went to his father. “But while he was still a long way off, his father saw him and was filled with compassion for him; he ran to his son, threw his arms around him, and kissed him.
I find this advice very reasonable, I have encountered people inheriting their parent’s money at a very young age and spending all the money in finding pleasures, luxuries, and gambling like they have no tomorrow. A few years back if I had 1 crore rupees then I would have spent it all on the superbike and world tour, but my view of money has changed with growing older, and instead of spending it lavishly, I would make a good investment wisely and my idea of money is not still matured completely and I know it will arrive with time and responsibility. So taking an early inheritance of your family money might not be blessed by God and you might lose it within a couple of years and become empty-handed.
- Graham, Benjamin, 1894-1976. (1959). The intelligent investor: a book of practical counsel. New York: Harper.
- Clason, G. S. 1. (19881955). The richest man in Babylon. New York: New American Library.