Ruth
Friends frequently pose these questions to me.
Should Christians invest in the stock market? Is it akin to gambling? Does the Bible offer guidance on investing?
One individual also inquired why the servant in Jesus’ parable, who buried his entrusted treasure, was reprimanded. It’s important to understand that in the parable, the master wasn’t primarily concerned with monetary gain or loss. His focus was on whether the servants obeyed his instructions and made wise use of what was entrusted to them. Taking risks and facing challenges are fundamental aspects of the abundant life that the Lord promises.
I realize that everything in my life is temporarily entrusted to me. My duty is to use these resources wisely, guided by God.
Therefore, I do invest in the stock market, and I also trade options. During my MBA (with a focus on finance) studies, besides acquiring various financial management techniques, two key insights from my professors have proven invaluable to me:
1. The US market is highly efficient:
The US stock market is often described as highly efficient due to the widespread availability and rapid dissemination of information. The Efficient Market Hypothesis (EMH) suggests that it’s difficult to “beat” the market because stock prices already reflect all available information.
With advanced technologies and communication networks, information gets disseminated almost instantaneously. This means by the time you receive a piece of news, chances are that market professionals and many individual investors will have already acted on it.
Prices in the US market adjust very quickly to new information. This swift adjustment means that any potential undervaluation or overvaluation may be corrected in a short period.
Relying solely on stock tips from friends, media, or so-called market gurus is not advisable. Often, such tips are either too late to capitalize on or are based on speculative information that is not dependable.
Practical Advice:
– Conduct Your Research: Instead of following tips, spend time understanding the fundamentals of a company, its financial health, and market position.
– Diversify: Diversification helps mitigate risks. Spreading your investments across different sectors or asset classes can provide a buffer against market volatility.
– Stay Informed: Regularly read financial news, follow reputed financial analysts, and use financial tools and platforms that provide real-time data.
(To be continued. Please come back next week.)
