Forward Article 
God’s money, our responsibility
There’s a movement occurring in America and around the world based on the understanding and practice of biblical principles of financial stewardship. This movement is founded upon the key principle that God owns everything and we are stewards (managers) of the financial resources He has entrusted to us.
We will give an account regarding our faithfulness to biblical stewardship, which includes how we manage our investments and financial resources as well as our time, talents, and giving. “Moreover, it is required of stewards that one be found trustworthy” (1 Corinthians 4:2 NASB).
Investment risks
A biblically based investment philosophy is governed by the idea that stewardship over an investment portfolio takes a higher priority than solely focusing on investment performance.
This means that too much focus on investment performance without considering risk and other factors can lead to poor results as well as poor stewardship.
But, biblical stewardship also suggests there is an investment approach that means accepting a prudent level of risk with the expectancy of a rate of return in excess of the risk-free rate.
The Parable of the Talents (Matthew 25:14-30) suggests that the minimum standard for financial stewardship is to deposit money with bankers in order to earn interest.
This is equivalent to what might be termed a risk-free portfolio.
In reality, no investments are entirely without risk. It is conceivable that banks could fail, but for practical purposes we refer to FDIC insured savings accounts, money market funds, and bank certificates of deposit as being risk-free.
The Parable infers that there exists a higher level of stewardship because the Lord says “Well done, good and faithful servant!” (NIV) to the two servants who doubled the talents entrusted to them.
These two stewards had to incur some level of risk in order to obtain the doubling of talents they achieved. This suggests that there is a level at which acceptance of prudent risk to obtain higher returns is wise stewardship of assets.
This principle of stewardship is compatible with the basic ideas behind what is known in finance as Modern Portfolio Theory.
Modern Portfolio Theory is based on the premise that a rational investor seeks to maximize the rate of return on investment for the level of risk assumed.
How much risk?
Most financial advisors do not recommend adopting an exclusively risk-free portfolio for long-term asset holdings. Although it protects the capital invested, a risk-free portfolio places significant limitations on the ability of that capital to generate an acceptable level of return.
Modest increases in return above the risk-free rate produce extraordinarily large increases in the amount of capital growth. Even a 1 percent or 2 percent increase in return over a risk-free rate will produce a significant increase in capital formation when it’s maintained for 10 to 20 years.
Risk-free assets should make up a part of the investment portfolio, but not the whole. The amount of risk-free assets in a portfolio depends on whether the risk profile of the investment portfolio is conservative, moderate, or aggressive.
Significant components of risk-adverse investments such as money market funds, bank certificates of deposit, and short-term U.S. Treasury securities can be included as a part of a conservative, moderate, or aggressive investment portfolio.
Stewardship of long-term investment assets can require some measure of prudent risk-taking to obtain levels of investment return in excess of risk-free levels of return.
Depending on your financial goals and objectives, time horizon, and tolerance for risk, this means that management of investment assets should generally include some exposure to equities and fixed income as well as other asset classes.
Investing guidelines
A biblically oriented investment philosophy should be guided by certain principles. The first principle is diversification, which involves having several different types of investments. Some of your funds might be in
Larry Burkett called this the Solomon principle of investing and cited this verse as an example of asset diversification: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth” (Ecclesiastes 11:2 NASB).
Another principle is to practice ongoing regular and periodic reviews of investment holdings. This helps to obtain good long-term results.
“Know well the condition of your flocks, and pay attention to your herds; for riches are not forever, nor does a crown endure to all generations” (Proverbs 27:23-24 NASB).
In addition, make regular additions to your capital base while riding out the short-term movements up and down in the market.
Maintaining a monthly savings and investment discipline is a key to achieving financial success. “He who gathers money little by little makes it grow” (Proverbs 13:11 NIV).
In summary, biblically based stewardship of investment assets suggests some level of prudent risk taking is appropriate for obtaining long-term financial goals and objectives.
The particular level of risk may be dependent upon many different factors. Investors may be profiled as conservative, moderate, or aggressive depending on their investment performance expectations, comfort level with risk, and time horizon.
Stewardship of investment assets includes practicing diversification, periodic review of investment holdings, and regular additions to a capital base during one’s earning years (the accumulation period). Practicing these principles helps us to be faithful stewards of what God has entrusted to us.
George M. Hiller, JD, LLM, MBA, CFP® is the founder and president of the George M. Hiller Companies, LLC, an investment management, tax, estate, and financial planning firm based in Atlanta, Georgia. He is a member of Kingdom Advisors, a network of Christian financial professionals.
We will give an account regarding our faithfulness to biblical stewardship, which includes how we manage our investments and financial resources as well as our time, talents, and giving. “Moreover, it is required of stewards that one be found trustworthy” (1 Corinthians 4:2 NASB).
Investment risks
A biblically based investment philosophy is governed by the idea that stewardship over an investment portfolio takes a higher priority than solely focusing on investment performance.
This means that too much focus on investment performance without considering risk and other factors can lead to poor results as well as poor stewardship.
But, biblical stewardship also suggests there is an investment approach that means accepting a prudent level of risk with the expectancy of a rate of return in excess of the risk-free rate.
The Parable of the Talents (Matthew 25:14-30) suggests that the minimum standard for financial stewardship is to deposit money with bankers in order to earn interest.
This is equivalent to what might be termed a risk-free portfolio.
In reality, no investments are entirely without risk. It is conceivable that banks could fail, but for practical purposes we refer to FDIC insured savings accounts, money market funds, and bank certificates of deposit as being risk-free.
The Parable infers that there exists a higher level of stewardship because the Lord says “Well done, good and faithful servant!” (NIV) to the two servants who doubled the talents entrusted to them.
These two stewards had to incur some level of risk in order to obtain the doubling of talents they achieved. This suggests that there is a level at which acceptance of prudent risk to obtain higher returns is wise stewardship of assets.
This principle of stewardship is compatible with the basic ideas behind what is known in finance as Modern Portfolio Theory.
Modern Portfolio Theory is based on the premise that a rational investor seeks to maximize the rate of return on investment for the level of risk assumed.
How much risk?
Most financial advisors do not recommend adopting an exclusively risk-free portfolio for long-term asset holdings. Although it protects the capital invested, a risk-free portfolio places significant limitations on the ability of that capital to generate an acceptable level of return.
Modest increases in return above the risk-free rate produce extraordinarily large increases in the amount of capital growth. Even a 1 percent or 2 percent increase in return over a risk-free rate will produce a significant increase in capital formation when it’s maintained for 10 to 20 years.
Risk-free assets should make up a part of the investment portfolio, but not the whole. The amount of risk-free assets in a portfolio depends on whether the risk profile of the investment portfolio is conservative, moderate, or aggressive.
Significant components of risk-adverse investments such as money market funds, bank certificates of deposit, and short-term U.S. Treasury securities can be included as a part of a conservative, moderate, or aggressive investment portfolio.
Stewardship of long-term investment assets can require some measure of prudent risk-taking to obtain levels of investment return in excess of risk-free levels of return.
Depending on your financial goals and objectives, time horizon, and tolerance for risk, this means that management of investment assets should generally include some exposure to equities and fixed income as well as other asset classes.
Investing guidelines
A biblically oriented investment philosophy should be guided by certain principles. The first principle is diversification, which involves having several different types of investments. Some of your funds might be in
- bank savings and certificates of deposit;
- different kinds of mutual funds, such as, stock funds and bond funds;
- real estate; and
- other asset classes.
Larry Burkett called this the Solomon principle of investing and cited this verse as an example of asset diversification: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth” (Ecclesiastes 11:2 NASB).
Another principle is to practice ongoing regular and periodic reviews of investment holdings. This helps to obtain good long-term results.
“Know well the condition of your flocks, and pay attention to your herds; for riches are not forever, nor does a crown endure to all generations” (Proverbs 27:23-24 NASB).
In addition, make regular additions to your capital base while riding out the short-term movements up and down in the market.
Maintaining a monthly savings and investment discipline is a key to achieving financial success. “He who gathers money little by little makes it grow” (Proverbs 13:11 NIV).
In summary, biblically based stewardship of investment assets suggests some level of prudent risk taking is appropriate for obtaining long-term financial goals and objectives.
The particular level of risk may be dependent upon many different factors. Investors may be profiled as conservative, moderate, or aggressive depending on their investment performance expectations, comfort level with risk, and time horizon.
Stewardship of investment assets includes practicing diversification, periodic review of investment holdings, and regular additions to a capital base during one’s earning years (the accumulation period). Practicing these principles helps us to be faithful stewards of what God has entrusted to us.
George M. Hiller, JD, LLM, MBA, CFP® is the founder and president of the George M. Hiller Companies, LLC, an investment management, tax, estate, and financial planning firm based in Atlanta, Georgia. He is a member of Kingdom Advisors, a network of Christian financial professionals.
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