Stewardship Is About Being a Good Risk Manager
Learning about stewardship is an ongoing process. I don't think that you ever "arrive." It is more complicated than any of us can imagine because in the bigger picture of things there is a tug of war going on between the reign of dependence in our life and the Almighty God and the greenback with the reference to God on the back ( I always thought that was telling). One of the things that comes to me consistently is risk. When people think of risk, they typically think of the kind of risk that you could take that would be considered life threatening versus the risk of money in an investment. Truth be told, there exists a whole spectrum of risks that we should have a financial game plan for beyond investing. Yet, that is a topic of another day.
Today we focus on investment risk. The verses of risk which I introduced yesterday are the same verse notated twice word for word in the same book of the Bible. Now, pause for a moment - since nothing happens by accident as far as the Bible is concerned, do you think that God wanted to get our attention? What are the odds of the same verse is word for word in the same book of the Bible separated by 5 chapters?
Proverbs 22:3 27:12 (New Living Translation)
A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.
In the verse, there is a contrast made between the prudent person and the simpleton. A Prudent person is a wise person who makes calculated decisions based on two sets of data, opinions, and facts. Let's just say that the internet is not kind in regards to the definition of a simpleton. I will define a simpleton as one who makes decisions based on emotion and one sided opinions.
I have been that simpleton and learned the hard way that there are two sides to every investment decision and while emotion has a place in decision making it shouldn't be the filter we use to make decisions or not. You live and you learn. Pop Culture Finance wants you to be anything but prudent. The simpler they can keep you in your beliefs, the better it is for their business model. It is the pros and cons of a one dimensional business model. At the core of risk management are actions that might not be in the industry's best interest for their business model. They argue that those actions to reduce risk are not in your best interests either. There is not a wrong or right answer to this debate. There is just a realization that you have to be open to two different strategies when it comes to investing. One is for growth and one is for risk.
How do you go about creating a strategy for risk protection for your investments? That is more than we can go through in these pages. I have created a 45 minute webinar that can introduce you to strategies you can implement on your own.
The point is I just want you to consider an important stewardship perspective.
Investing for most people is based on a one dimensional concept. Grow money over time and hope the bear markets aren't devastating. For the prudent steward, investing is a multi-dimensional approach.There is a time to grow investments and there is a time to protect. Investing in the stock market, both types of markets are present. Thus proper stewardship requires both.
I write about all types of topics on the prudentmoney.com website. I wanted to start a series and address what people are dealing with when it comes to money and how to successfully maneuver through the chaos through the lens of stewardship. IF you think that this could help someone, introduce them to the writings by sending them this blog.