Proverbs 27:26 - Ancient Wisdom For Today’s Investor
“The lambs will provide you with clothing,
and the goats with the price of a field.” — Proverbs 27:26
Clothing and Fields
In the ancient Near East, sheep and goats weren’t managed separately. They were run together in mixed flocks — sheep grazing low on grass, goats browsing higher on shrubs. Today we call it “multi-species grazing” and the point is to take full advantage of biological diversity.
Archeozoologists studying bones and settlement records tell us herders often kept a 3:2 ratio of goats to sheep. Why this ratio? These shepherds were worse than I am at keeping lambing records, so we can only take a guess. Ancient goat breeds had a higher birth rate (tending to birth multiples to the singles of sheep), produced a higher milk yield on tougher terrain, and were a more liquid commodity. They could be traded straight up for land. Sheep offered wool and a steady yield, clothing households year after year. Sheep breeds were also hardier than goats, offering more natural resistance to parasites and illnesses. As a sheep farmer, that part sounds like total BS but this is what the historical record says. Whatever the reasons, the ratio wasn’t random. Shepherds struck a balance.
Modern Portfolio Theory
Fast forward two thousand years. Enter Harry Markowitz, the economist who built Modern Portfolio Theory. His “efficient frontier” showed mathematically what herders practiced intuitively: mixing assets with different traits creates the best of return and protection. Out of that came the famous 60/40 portfolio. Sixty percent stocks, forty percent bonds.
In portfolios, this balance works. From 1980-2020, a simple 60/40 mix of U.S. stocks delivered around 9% annualized returns with far less volatility than an all-stock portfolio. Over decades, it survived wars, inflation, recessions, and booms. It has survived by combining different strengths.
OK, here’s your “a-ha!” moment. That 3:2 flock ratio? Do the math. It’s the same as the 60/40. Goats were the stocks of yesteryear — volatile, fast-growing, expansionary, but falling off cliffs when your back was turned. Sheep were the bonds — slower, steadier, more protective, providing returns that could buy you a sweater but not a whole field.
Farmers rebalanced their herds as conditions changed; investors rebalance their portfolios for the same reason. If you looked across your field and all you saw was goats, it’s time to buy some more sheep.
From Pasture to Portfolio
For the eight people who read my “Don’t Get Caught in Fancy Britches: No Frills Investing” post, this section will look familiar. I’m just reiterating the same advice: keep investing simple, cheap, and easy to manage.
There are a few easy ways modern investors can build their own “clothing and fields” portfolio.
Use a balanced fund. Vanguard offers VBIAX*, iShares offers the exchange-traded fund under the ticker AOR* (adult-oriented rock feels about right). These funds rebalance so they’re always hitting the 60/40 mark.
DIY with Index Funds - most appropriate I find for folks close to retirement. If you want to talk more about this, please book an appointment.
Buy 60% in a broad stock fund (something like VTI*).
Buy 40% in a bond fund (like BND*).
Rebalance as necessary.
Target-date Funds
For retirement accounts, target-date funds (funds called things like FreeLife 2050 or whatever) naturally glide from stock-heavy to bond-heavy over time. They’re basically shepherds who adjust the goat-to-sheep ratio as you age.
Speaking of scripture, Kurt Vonnegut once joked that if Jesus had lived longer than 33, the complaints would have been “Ahhh, I’ve heard this all before. He just keeps repeating himself.” The world is loud and full of bad ideas; if you can find the few true good ones, just keep saying them. One of them is: Keep it simple, cheap, and easy to manage.
* I’m agnostic about which custodian or fund you use. I am not recommending these particular funds. These are not investment recommendations.
Timeless Wisdom
Proverbs put it plainly: lambs give you clothing, goats give you fields. Balance offense and defense, protection and expansion. Ancient herders practiced it in their flocks. Harry Markowitz proved it with math. And investors can still apply it today.
At the end of the day, you need both the clothing and the fields.
You’ve built something meaningful. Let’s make sure your finances help it thrive!
