Jesus’ parables can be analyzed from many different perspectives to glean many different meanings and applications to our lives, and the parable of the talents in Matt. 25:14-30 is no exception. This parable, though, is probably the most overtly financial parable in the gospels, as it deals directly with how three servants handled money entrusted to them in different ways.
A quick recap of the parable
If it has been a while since you’ve read this parable or just need a refresher, it starts with a man going on a long journey. This man entrusts his servants with his wealth—one servant gets five talents (or bags of gold, depending on the version you are reading), another two talents, and another one. The man who received five talents immediately invests the money and doubles it. The one with two talents does the same. The servant with one talent buries the money in the ground, claiming he was afraid he would lose the money if he invested it. This angers the master and the master scolds him saying “Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest,” (Matt. 25:27 NIV).
The King James Version uses the word talent (an ancient unit of value) to refer to the money entrusted these servants. Because of the convenient homonym in our modern language (talent meaning a special aptitude), I have heard numerous sermons and read many articles using this parable as instructions that we should use our God-given abilities to work for Him rather than let them languish or use them for secular pursuits.
While I don’t believe this definition of the parable is wrong, I think we should also look at it from a more literal perspective as well. We should look at what it teaches us about investing money.
How much was a talent worth?
A talent was an ancient unit of measurement, and when we read this parable we often gloss over the amount in pursuit of the deeper meaning. The amount, though, is actually significant because it is no small sum. It is difficult to ascertain the exact value of a talent of gold in the time, but in Israel a talent was both a weight measurement (about 100-200 pounds depending on the metal) and a monetary value. A talent as a monetary value was worth approximately 6,000 drachmas, or about 20 years’ wages. This would mean that a talent, roughly estimating based on current U.S. wages, would be worth about $1 million, meaning one servant was entrusted with roughly $5 million, another $2 million, and another $1 million.
What does this parable teach us about investing?
When the amount is better understood, you start to realize that this parable has more implications in investing than simply encouraging you to do it. It is not just the servants who are investing the money, the master is also investing. The master can be thought of as you—the investor—and the servants as investment managers—intermediaries between you and the open market.
The master is investing in his servants based on his trust in them, which means he is diversifying his portfolio and weighting his investments. In modern investing, this would mean not investing everything in one location as well as putting larger amounts of money in more stable investments and smaller amount in riskier investments. He breaks up the investments 62.5 percent, 25 percent, and 12.5 percent, which is actually a very reasonable breakdown for a weighted investment strategy.
He could have given all of his money to the one investment he trusted (the servant he gave five talents to), but instead he gave money to two other investments, thus reducing his risk and building a portfolio of investments.
The servants showed a knowledge of market strategy as well
The two servants he trusted most showed an understanding of market strategy based on the fact that they immediately invested the money. It says (emphasis added), “The man who had received five bags of gold went at once and put his money to work and gained five bags more,” (Matt. 25:16 NIV).
Money in the stock market grows over a long period of time. There can be short-term gains, but a wise market strategy is long-term. Waiting for the market to be right is a risky and futile approach.
The one servant who did not invest, though, buried his talent in the ground. This would be comparable to putting a large sum of money ($1 million in this case) in a standard savings account. In modern society, putting money in a savings account will actually depreciate because of inflation. In other words, if you let your money sit in a savings account, your money will slowly be worth less and less.
The master points out that even if the servant had simply put the money on deposit with a banker (who would in turn invest it), he could have received some interest, thus keeping up with inflation. This would be comparable to putting your money in a high-yield savings or checking account (at least 2-3 percent) or investing it in the bond market. Instead, the servant let the money sit in the ground where it lost value.
The master reassessed and updated his portfolio
Finally, the master does one more thing that is applicable to modern investment strategy. He reassesses his portfolio and drops his worst performing investments. He takes a look at his portfolio and determines that the investment that he put one talent into has actually lost money for him, so he takes that money and reinvests into his highest performing investment—the servant who he entrusted with five talents.