Talmudic Risk-Diversification

Talmudic Risk-Diversification

Risk more than others think is safe. Care more than others think is wise. Dream more than others think is practical. Expect more than others think is possible. -Cadet Maxim

The Torah is filled with stories of people who risked it all, put their faith in God and beat the odds. Perhaps the most famous is Moses, the humble shepherd with a speech impediment, who listened to God and challenged mighty Pharaoh and the Egyptian empire. Moses went on to lead the Jewish people out of Egypt, leaving Egypt decimated and in ruins.

However, for those that haven’t heard the voice of God, our sages suggest a more nuanced approach to risk.

Our patriarch Jacob faced the possibility of war against his brother Esau; therefore, he spread out his risk in preparation for the potential battle, splitting his forces into two. Rabbeinu Bechaye on Genesis 32:9 (Vayishlach) connects the strategy of spreading or diversifying risk to an important Talmudic teaching related to financial risk management:

“A person should always split his capital into three: one third should go into land, one third should go into business and one third should be readily available.”

The logic behind the Talmudic dictum is both reasonable and fiscally sound. To have one third of one’s capital in land (back then it wasn’t as volatile as today) was a stable long-term investment. One third in business was where one could earn a greater return on investment, with its accompanying level of risk. To keep one third liquid allowed the possibility for fast reaction to opportunities in the market, emergencies, or as became common in later centuries, rapid escape. Included in this mix is the other financial command of setting aside one tenth of one’s income to charity.

A modern-day portfolio according to Talmudic financial advice would then consist of the following:

  • 30% in stable, long-term investments,
  • 30% in higher risk, higher reward entities,
  • 30% in cash or highly liquid instruments, and
  • 10% for charity.

The Torah tells us of the fantastic financial success that the patriarchs Abraham, Isaac and Jacob enjoyed and attributes it to divine intervention. However, it is likely that once they had their wealth they knew how to protect it and grow it intelligently, with continued divine assistance.

May both our risky and our more mundane endeavors be blessed with divine success.

Shabbat Shalom,



To the city of Scottsdale, Arizona. A wonderful place to conduct business.

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