Is the Investment Profitable?

Before I talk about investing during our brief lives, I want to review some realities and wisdom about life from Solomon, Jesus and the practical thinking of James.

First of all, work comes before profit. You can talk about and dream about making progress in your investing journey, but the real progress can begin when you decide to work on your investing. Are you willing to go beyond talking and start doing? Solomon says it this way: “In all toil there is profit, but mere talk tends only to poverty.” Proverbs 14:23

Jesus had a better handle on life and the meaning of life than anyone. When he was asked questions he gave answers that were profoundly wise. When he asked questions, his questions resulted in an “obvious” answer. Here is one example:  “For what will it profit a man if he gains the whole world and forfeits his soul? Or what shall a man give in return for his soul?” Matthew 16:26 If you don’t know the answer to this question, then you are probably going to be disappointed with the results of your endeavors.

Finally, there is an end to tending your flocks and herds. You may work hard and you may amass a huge amount of wealth, but you are going to have to leave it all behind. That should change your perspective about the use of your time and wealth. James says it this way: “Come now, you who say, ‘Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit’— yet you do not know what tomorrow will bring. What is your life? For you are a mist that appears for a little time and then vanishes.” James 4:13-14

With those truths in the back of your mind, to guide our thinking about profits and profitability, I want to help you avoid loss. The goal is profits and profitability.

Number Seven: Is It Profitable?

What is profit? Here is a simple definition: “Profit is the money earned by a business when its total revenue exceeds its total expenses. Any profit a company generates goes to its owners, who may choose to distribute the money to shareholders as income, or allocate it back into the business to finance further company growth.” – Finance Strategists

When I look at the investments some of my friends make, I have to wonder if they understand the concept of profitability. They buy stocks in companies because the price-per-share is low. As a result, they can buy 100 or 1,000 shares with a relatively small investment. However, 99.99% of the time, they wind up with a loss. The reason is simple: stock prices do reveal something about an investment’s profits.

Consider one ludicrous example: LGO  Largo Inc. You can buy 1,000 shares of LGO for $1,000 or less. But, using Seeking Alpha, it takes me 30 seconds to know that I am not going to buy shares.

Reviewing My ROTH IRA

I will admit to being tempted by some investments. Take SMCI as an example. Super Micro Computer Inc has a profit. The profit metrics are what make it higher risk. Using Seeking Alpha you can see the areas where SMCI may underperform other Information Technology investments. In other words, if you have to choose between SMCI and SNDK (Sandisk Corporation) then the profitable choice is SNDK.

Here is a review of my ROTH IRA investments.

ETFs cannot be graded by “profitability.” However, there are measurements that matter, including dividend growth and ten-year total returns. Both of those are likely indicators of the underlying profitability of the investments held by the ETF. That is why I still like DGRO, SCHD, and VYM.

Summary

If you had a chicken that wasn’t laying eggs, but was eating food that you had to buy, then you will experience a lack of profit. Of course, you can eat the chicken. Sometimes, in the investing world, you don’t even get to eat the chicken. Therefore, be wise about the investments you choose for your portfolio. Profits matter.

Proverbs 27:23-24 “Know well the condition of your flocks, and give attention to your herds, for riches do not last forever…”

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All scripture passages are from the English Standard Version except as otherwise noted.