JESUS GIVES A LESSON ON RISK

When Jesus told this parable on the talents, there were no investment bankers present nor were there private equity managers or even publicly held companies. But the merits of how one places their talent (money) to work can still be seen 2000 years later in many applications that do not alter the message. You may wish to read it again in Matthew 25:14-30. Just as the parable portrays a man going on a long journey and wishes for his assets to be managed well while he is away, the same is true for money managers who are entrusted with funds from their clients, as are corporate managers of companies who are entrusted with the running of the shareholder's company. Each of the three found themselves with a different responsibility as one was given $500,000 to manage; another $200,000; and another $100,000. (my ed license for inflation)

The two who had been entrusted with larger amounts, immediately started trading and investing and in fact were able to double their original values. The servant with $100,000 decided that it was too risky to try to invest and buried his nest egg in the ground so that he would be able to return at least the original principle to the master at some point in the future. A long time past (maybe 5 years let's say, and the master returned. His performance review with the three money managers was quite interesting. For the two who had achieved a 14.37% annualized time weighted rate of return, he congratulates them and says ..."well done, good and faithful servant"... They were rewarded with even more responsibility and more assets to work with.

The servant who buried the $100,000 came up with the most outrageous reply as to why he buried the money. "Master, I knew you to be a hard man reaping where you did not sow, and gathering where you did not winnow; so I was afraid, and I went and hid your talent in the ground." I do not recommend this explanation for anyone especially if you have underperformed. How does this relate to investing and risk taking? Not all of our assets are to be in high risk situations any more than they are to be buried in the ground. Jesus was trying to tell his disciples that the servants need to know what the master expects and then work in every honest way to achieve the desired results.

Whether you are investor or advisor, God has blessed you with many talents, and how you manage them in your lifetime here on earth, will tell a lot about how you will spend eternity. It all belongs to God and you are just the short term holder of things and your limited power of attorney lasts only as long as your lifetime. If you are hiding something today that you buried in the ground that could be more useful if placed in a productive spot, dig it up and get closer to those words that every servant wishes to hear, "Well done!"

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