The Bible provides us with four primary guidelines for investing.

1. Be a steady plodder

The fundamental principle for becoming a successful investor is to spend less than you earn and regularly invest the surplus. In other words, be a steady plodder. The Bible says, “Steady plodding brings prosperity, hasty speculation brings poverty” (Proverbs 21:5, TLB). Nothing replaces consistent, month-after-month investing.

2. Avoid risky investments

God warns us to avoid risky investments, yet each year thousands of people lose money in highly speculative investments and scams. The Bible says, “There is another serious problem I have seen everywhere—savings are put into risky investments that turn sour, and soon there is nothing left to pass on to one’s son. The man who speculates is soon back to where he began—with nothing” (Ecclesiastes 5:13-15, TLB).

How many times have you heard of people losing their life’s savings on a get-rich-quick scheme? Sadly, it seems that Christians are particularly vulnerable because they trust others who appear to live by their same values. The strategy for avoiding risky investments is to pray, seek wise counsel from your spouse and others, and do your homework.

3. Diversify

Money can be lost on any investment. Stocks, bonds, real estate, gold—you name it—can perform well or poorly. Each investment has its own advantages and disadvantages. Since the perfect investment doesn’t exist, we need to diversify and not put all our eggs in one basket. “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth” (Ecclesiastes 11:2).

4. Count the cost

Every investment has costs: financial, time, effort, and sometimes even emotional stress. For example, a rental house will require time and effort to rent and maintain. If the tenant is irresponsible, you may have to try to collect rent from someone who doesn’t want to pay—talk about emotions! Before you decide on any investment, consider all the costs.

Apply the Principles: When and Where to Invest

Now, let’s apply those four investing principles.

When deciding where to invest, you need to consider your goals, timeframe and tolerance to risk. The concept of risk is important because, as the “Time & Risk” diagram shows, investments with the best track record also carry the greatest potential for loss—at least in the short run.

In other words, the more time you have, the more you can afford to invest in stocks, mutual funds or real estate—all investments that can lose value in the short term but historically offer the best opportunity over the long term. If you have ten or twenty years before you need the money, you can probably recover from most market downturns, but if you need it in less than five, alter your approach.

This means using different investments for different goals. An investment that is suitable for a fifteen-year goal is simply not appropriate for money you will need in two years. If you need the down payment to buy your home in two years as opposed to funding your retirement in fifteen years, you will invest the money differently. Move your money into more conservative investments as you get closer to the time you will need to spend it.

With that in mind, here are strategies to consider over the short (less than five years) and long (more than five years) term.

Less than five years. When you need the money in less than five years, invest in what are known as cash equivalents: money market funds, certificates of deposit (CDs), and Treasury notes.

Longer than five years. The most common investments of longer than five years are mutual funds, stocks, bonds, and real estate.

Mutual funds. The biggest advantage of investing in mutual funds is that you can apply the biblical principles of diversification and professional investment advice. There are many kinds of mutual funds. Some are composed of stocks, some of bonds; some contain both. Others mutual funds consist of international stocks or are limited in their selection to a investment, such as real estate. There are also many types of bond funds—those invested in government bonds, corporate bonds or tax-free municipal bonds. A balanced mutual fund invests in cash-equivalents, stocks and bonds. Choose funds that have solid track records for a minimum of ten years.

Stocks. When you buy a stock, you are purchasing part of a company. Generally, stocks have one of the greatest opportunities for profit, but you also can lose a lot if the company does not perform well. Some stocks pay a dividend.>

Bonds. When you buy a bond, you loan money to a business or the government, and they pay you interest. Investors buy government bonds for safety, municipal bonds for tax-free returns, and corporate bonds for higher yields. It is important to realize that when interest rates rise, the value of bonds decline, and vice versa.

Real estate. People buy property for income or appreciation. There are tax advantages for owning buildings because depreciation is deductible. However, unlike publicly traded stocks or bonds that can be sold quickly, real estate may require a long time to sell.

Remember, the name of the game is to be a steady plodder—consistently add to your investments and allow them to compound.