Are you a gambler or an investor? Consider your entire portfolio that you invest. Do you understand how you will succeed if one particular asset or asset class (e.g. the stock market) goes up, goes down, or stays flat? If the success of your financial investing strategy requires any one asset to move in a particular direction, then what happens if it does not do that? You are essentially gambling your money on an asset increasing in value.

Let’s consider someone investing in the US stock market.

• A gambler may make a disproportionately large bet on the stock market or an individual stock going in a specific direction. For example, he hopes or believes it will increase in value. He may make a big gain if things go his way, but if the market crashes he loses much money.
• An investor avoids the greed of chasing the maximum gain, that brings with it high risk. Instead, he plans a strategy that is diversified across multiple assets or asset classes (e.g. diversified group of stocks, bonds, cash, perhaps some silver or gold). If the market crashes he is positioned to use some of his cash position or bonds to buy stocks after he is confident the crash has bottomed out and stabilized. When stocks recover, he comes out with a profit. Later, he rebalances his portfolio back to target by selling some of the stocks he picked up when values had fallen. If he suspects a certain investment has potential for high gain, he considers investing a smaller portion of his portfolio to capture the gain with less overall risk… this is called speculative investment.

If you have not done so in a while, it is a good time to consider your investing strategy. The global economy is trying to recover from struggles through many years and yet stocks are already priced at or near all-time highs due in part to heavy interference by national governments (e.g. “the Federal Reserve” keeping interest rates low artificially, thus driving people into the stock market at higher risk).

Do you know if your portfolio is prepared for either outcome (e.g. stock markets decline or rally higher)? or are you betting that it will work out in one particular outcome and unprepared for the other?

—-

Remember that all you have belongs to God. Manage your money God’s way. Visit GrowGodsMoney.org .