What Is Investing?

What is investing? Even if you consider yourself an investment expert, it may not be what you think.

Money that is stagnant doesn’t create an exponential effect. Money that passes through hands from work to goods creates nothing exponential. So how does money grow? When it’s in motion. So investing is putting your money in motion. Investing makes your money multiply.

We know from history that those who invested their money by owning companies and buying market-hedged investments and real estate have beat inflation by a good margin over time. Inflation is where money depreciates in value as time goes on. Your investments need to keep pace with and surpass inflation.

Sowing and Reaping

What do we mean by “multiplying your money”? Think about investing as planting seeds that will grow into a harvest later down the road.

You might be surprised to learn that the Bible talks about this. The apostle Paul says, “The point is this: whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully” (2 Cor. 9.6). Basically, if you eat the seeds, there is no compounding. If you keep your bag of seed in the garage, they will never multiply. Compounding happens when the earnings from an investment are re-invested to earn even more over time. The only way to reap is to step out and do something.

Be warned that the first times you sow and broadcast your seed, you might not make the best investments. But you have to get out there. Then build on what you learn, and a harvest will come from it. Warren Buffett describes the benefits of compounding like “being at the top of a very large hill with wet snow and starting a snowball and getting it rolling downhill.”

Two Ways to Earn a Profit on Investments

Investment growth comes in two ways: appreciation and dividend.

Think about appreciation in terms of a house analogy. Let’s say you buy a beach house, and it appreciates, meaning the house is worth more over time. If someone buys it from you at a higher price, you earn a profit. The second way to grow your investment is through dividends—meaning you buy the beach house in order to rent it out to earn profit on the rent. The house stays in your hands, but you get consistent returns.

Investing works similarly—whether the stock market, real estate, or other investments. When you own stock or real estate, price appreciation means that when the value goes up, you can sell it for a profit. The other way to earn income on an investment is through dividends. This can be interest that a bank pays you for keeping your money there or payments that a company makes to the shareholder for owning the stock.

Investing is a wise thing to do with the resources God has given you. So put your money to work so it can multiply, and then you will be in a better position to give more.