Wednesday, February 15, 2006

An investment, or just an asset?

Whether it's your local financial representative, a car dealer, the piano sales man in the music store, or even the guy trying to sell you new windows, there is a phrase you're almost guaranteed to hear:

"It's a great investment."

But is it? Strictly speaking, "investment" is the "clothing" of an enterprise with the resources it needs to operate. An "investment," therefore, is money provided for a share in a productive enterprise--a "productive asset," if you will. Thus, cars, houses, windows, and even "real money" (gold and silver) are assets but not investments--being inherently unproductive.

The Bible points to this as well. The King of Israel was forbidden (Deuteronomy 17:17) from accumulating horses, wives, or gold. When Solomon got rich, he hoarded gold until silver became (1 Kings 10:11) of little value. In other words, there was horrendous inflation in that country due to the hoarding of assets. When Solomon died, the kingdom was split in part due to....high taxes described in 1 Kings 12, used by Solomon to finance his splendor.

The consequences of hoarding assets--especially via debt--in lieu of making prudent investments, can hardly be overstated. It is not for no reason that Proverbs 24:27 notes that a man ought to work on his house only after his work in the fields is completed. The former is an asset, but the latter is an investment. Tell that to the next salesman you meet.

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