NOTE: This is an excerpt from my book “The Moses of Wall Street”
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I think there’s a difference between a gamble and a calculated risk.”
~Edmund H. North
11 Wall Street, New York, NY: home of the New York Stock Exchange
Wall Street has become synonymous with the financial markets of the United States. It is known as the premier financial capital of the world and is home to the headquarters of many of the world’s most renowned financial businesses and market exchanges. Every weekday, tens of billions of dollars change hands through the exchange of stock in publicly traded companies.
It is an unimaginable feat.
What I find even more amazing is that anyone walking down Wall Street will discover that it dead-ends at the doors of Trinity Church. Trinity, founded in 1697, has been looking down Wall Street for a long, long time.
I suspect God intended for it to be that way.
Just a short walk from the New York Stock Exchange, you could find yourself sitting inside Trinity, reading the Bible and learning more about Wall Street than you might ever imagine.
I would never have guessed, in a million years, that God’s Word would hold a secret, hidden in plain sight, which would reveal a rock-solid foundation for investing.
But why wouldn’t it?
The Bible is full of God’s wisdom.
Why wouldn’t it contain the key to success in our financial lives?
Did you know there are over eighteen hundred references to money and finances in the Bible?
Sometimes, I think we put the Bible in a box, believing it is only for our spiritual life.
The official beginnings of Wall Street came through the Buttonwood Agreement in 1792. The purpose was to provide more structure and reduce manipulation found in the trading auctions. The concerns people have today about Wall Street are not new.
What is the true purpose of the New York Stock Exchange?
To allow people to trade shares of companies they own— hopefully, for a profit.
The stock exchange provides an avenue for companies that have growth and financial soundness to offer for sale shares of the company to the public. A company raises money by selling shares of ownership—stock—to the public. The company can use the money in whatever manner it deems most appropriate for its continued growth. Those buying the shares now possess a piece of the company. The shares of stock are subject to increase or decrease in value over time. If a shareholder decides that the company’s best days are behind it, they can sell their shares almost instantly. If they believe more good times are ahead, they can remain a shareholder and benefit from the appreciation of their stock as the company continues to grow and generate more shareholder value.
Wall Street isn’t bad; it’s just an address.
Unfortunately, a huge number of people believe that Wall Street is full of crime and rigged in favor of the money-hungry scoundrels who go there to find their next victim. We all remember Enron and Bernie Madoff, real examples of our worst fears.
Even movies about Wall Street promote ruthless ambition.
In the movie, Wall Street, Gordon Gecko says, “The point is, Ladies and Gentlemen, that greed, for lack of a better word, is good.”
Say what, Gordon?
Didn’t the Enron crew and Bernie all go to prison?
What could be worse than losing your hard-earned money, except for maybe ending up in jail?
Whatever you do, don’t let a few bad apples scare you away from one of the greatest opportunities available, an opportunity in which you can own a piece of the pie and benefit from America’s success.
What’s good about Wall Street?
One of every two start-up businesses fails in its first five years. Seven out of ten fail within ten years. Depending on the source, survival rate statistics can be much worse. Those businesses remaining may not be tremendously profitable. With a little effort, the stock market allows you to discover and own those companies that have defeated the odds and built very profitable businesses. You and I can profit without building a business of our own.
It provides a means for the average American to own part of a successful company and generate a profit through the appreciation of the stock they own. What a huge opportunity for those who save some money and are willing to invest it! Opportunities come about all the time. It’s just a matter of whether you’ll be there, looking to see the next huge winner, like McDonald’s, Microsoft, Dell Computer, Yahoo, Cisco Systems, Google, and so on.
Wall Street is a place where hard work pays off and creates wealth for those who understand it and get involved. Look at Warren Buffett and Sir John Templeton, two greats on the noble side who have helped others tremendously.
It’s easy to believe that Wall Street is a place for gamblers.
Let’s imagine you’re at a horse race. The track lets you place a bet on a horse. Let’s say the race is three laps. You watch intently as the race begins.
Ding, ding, ding—off they go!
Now imagine that as they finish the first lap, your horse is in first place. But halfway into lap two, your horse slips back into fourth place.
Oh, no!
As he enters lap three, your horse is in deeper trouble and is now in eighth place. It is not looking good at all.
I think I’ll go back and reduce my bet.
Sorry! You can’t do that.
What?
You mean I’m stuck?
I can’t lessen the damage if my horse loses?
Sorry! You’re in it to win it, as they say. You’ll just have to sit and watch. That’s gambling.
Gambling asks you to give your money and hope—without a reasonable chance of winning and with absolutely no way of limiting your loss. You really own nothing, and most times, you’ll end up with nothing.
What a lousy position to be in!
If, on the other hand, you are investing and you buy stock in a company that trades on the stock exchange, many options are available to you.
For example, let’s say you buy shares in McDonald’s. If, over the next few weeks or months, McDonald’s stock goes down, and you begin to lose money, you have the option of selling some or all of your stock, limiting your loss by taking decisive action. Another great advantage to investing is that you can also buy more stock if it is going up in value and working well.
These adjustments are available to an investor.
This sounds like such a basic skill, but all too many investors do this backwards or not at all.
If you put your money in the stock market and then do nothing but hope that in ten, twenty, or thirty years it will be worth more, what does that sound more like—investing or gambling?
Being an owner of stock also requires you to be a manager. You must understand that owning the right stock at the wrong time can cost you money. You must learn to be on guard for many harmful characteristics that can derail you—things such as greed, pride, and fear, any and all of which can bring defeat to most investors.
Managing ownership of stock requires you to manage both the stock and yourself. Fortunately, the Bible has many answers on how to understand and handle ourselves. It speaks to the value of being generous, not greedy; humble, not prideful; and bold, not timid.
God’s Word has many principles that teach us how to avoid the characteristics which will cause us not only harm in the stock market but also grief in our everyday life. We can learn proper management techniques to address ourselves and our investments. Management requires us to make decisions and adjust as we gather new information over time.
We must manage.
That’s what is terrific about the stock market. You can own any publicly traded company you want to in a matter of seconds. If you choose to, and you should, you can manage that ownership, over time, using sound rules and guidelines. You have the opportunity to generate profits according to your abilities.
When you buy stock, you own an asset and can manage it. You can be a steward.
Being a hopeful steward is good, but being a good steward requires more than hope as a primary strategy.
You must have a system with rules to guide you and keep you out of harm’s way. God gave us the Ten Commandments through Moses so that we could live a successful life. I believe He has called me to share with you my system and the investing commandments that guide me in being a good steward. You’ll find The Ten Commandments of the Successful Investor near the end of the book.
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