Category Archives: Investing

Control Debt, Control Spending, Ethics, Generate Income, Investing, Plan Carefully and Seek Wise Advice, Proverbs, Saving, Stewardship

Victory Comes Through Wise Counsel

We are all at different experience levels and have different gifts in regard to many aspects of life that affect our finances. We have a certain perspective that contains some bias based on our prior experiences and personality. We will better understand a situation well if we approach it from multiple perspectives including wise counsel from those we trust.

Proverbs 11:14

  14Where there is no guidance the people fall,
But in abundance of counselors there is victory.

I remember a great example where my family was walking from a van to the entrance of some entertainment we were going to on vacation. I was focused on the destination, where is the gate, where do I buy tickets, and “marching” quickly with purpose. Yes I was focused on my goals. My wife, however, also interested in our shared goal, had a very different perspective. As I promptly walked passed a beautiful flower display she gently tugged at my arm and showed it to me. I am glad she did. We were approaching the same situation and had the same goals, but very different perspectives while doing so. Together we had a better view then individually.

This same concept is true for controlling debt, controlling our spending, behaving according to the ethics and guidelines that God has lined out for us in the Bible, making decisions with regards to generating income, saving, investing and stewarding our finances. Seek wise counsel from people you can trust or from professionals. To seek counsel does not mean you must follow it. It simply provides more background and understanding and perspective to help you make wise decisions and achieve victory on your goals. Of course, we should be cautious as to who we trust and how we weigh the opinions and insight of others. To listen to the counsel of a fool is to join him in his folly.

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

Investing

Better to Lose Opportunity than Money

For those of us who are focused largely on investing rather than high-speed trading to grow our portfolio over time, we must constantly remind ourselves that our time horizon is not to maximize our net worth daily, weekly, or even monthly. We are on a long journey of growing our money reliably and predictably over time.

When we see high volatility in stock markets as we have recently it can be tempting to try to start trading swings or try to perfectly time our investments to buy at the very bottom and sell at the very top. This is not typically an effective strategy for most of us.

Try not to get distracted by hindsight evaluation of “missing opportunities” where you “could have” invested at the bottom. Market bottoms are seldom formed in a day. What looks like a cheap stock today, may be even cheaper tomorrow or in 6 months.

Stay focused on long term strategy. If you are well positioned with cash or cash equivalents available in your stock portfolio, start identifying what stocks you may want to buy and at what levels. Establish a plan with a specific time frame (e.g. 1 year, 5 years, 20 years). Then identify for those stocks you want to buy… at what levels you want to cost average your way in as the market may continue to go down or may level and go back up.

It is ok to not have all your money in the market even when it hits bottom. Part of a good strategy is capital preservation… not losing what you already have. And a foolish mistake can wipe away a lot of prior gains and turn them into a loss in a volatile market.

As an example from the past, let’s consider some round numbers for the S&P 500. The market highs were around 2100. If you put in all your cash or cash equivalent to the index when it declined 5% to 2000, you may have felt good at the time, but probably less so when it moved lower after that. It may be even lower in 3-6 months.

On the other hand, if you have mapped out a strategy to cost average in and bought some at 2000, knowing you have more investment capital to invest if it continues to decline, you are probably feeling ok about your decision.  You may want to keep buying in portions as the market declines 5, 10, 15 or 20%. If it never makes it down to your final “buy” targets… that is fine. You have missed an opportunity but not lost any additional money. In fact, that is good for the rest of the investments you already made.

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

Diversification, Plan Carefully and Seek Wise Advice

Diversify Through Fixed Income

When I first started investing, I did not know where to begin in regards to researching the fixed income (e.g. government or corporate bonds) asset class. It is a significant asset class to consider for our portfolio which typically may have more modest returns but less risk than stocks. It can seem overwhelming to at-home investors, or even those who are trying to understand recommendations from their financial advisors. However, we do not win by guessing or by always assuming our advisor is right, but by studying and asking good questions to improve our understanding.

I recommend spending some time at the Vanguard site online to research and possibly invest in diversified government or corporate bond funds. They provide a lot of choices and effective diversification through bond funds. They also have a good search tool to help you sort through the many options available and find what is right for you.

vanguard bond funds

Take the time to research and study either with the Vanguard search tool or other similar tools at different investing sites. Browse through and drill down to read about the different options. For those working with a financial advisor, use this research to help focus your questions and validate the advice they may be giving you. Compare the fee structure of products you are offered vs. the low fee structure at Vanguard.

For the record, I have no affiliation with Vanguard or any other products I comment on in my articles.

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

Diversification, Plan Carefully and Seek Wise Advice

Diversify Within Stock Investments

Once you have used your personal financial plan to decide how much money you have to invest within an asset class like the stock market, you still want to ensure you diversify within that asset class.

In other words, if you have 5,000 dollars to invest in the stock market you should not put it all in one stock or even in a set of related stocks that could all lose value simultaneously. For example, I am not diversified very effectively if I spread my investment across 5 stocks, but they are all banks… or all oil companies… or all technology companies. If everything goes well I may feel like a genius, but I am also taking a significant risk if something disrupts a whole sector. If I invest in all oil-related stocks, then I am subject to the changes in the price of oil affecting my entire portfolio.

There are many options for investing, even in how to diversify. One way to diversify is to invest in Exchange Traded Funds (ETFs) that represent sectors of the stock market instead of single stocks. Another way is to pick specific stocks but make sure they are diversified (e.g. maybe 1 financial, 1 oil, 1 tech, 1 healthcare, etc.). However, the more specific you get in investing in individual stocks, the more homework you need to do to keep up with each individual company and what may affect the stock price. You should never just buy and hold without continuing to follow the stocks or groups of stocks you hold.  You should visit the performance of your investments and underlying sectors or companies on a regular basis.

Many are well served to consult an investment professional. However, even those who rely on professional investors to help them should do their own homework to understand the recommendations and investments that they are making. You would not just tell a real estate agent to buy a house for you… you go with them, look at the data, look at the specific houses, you get their input but you make the decisions. The same is true for investing.

For those still trying to find out what diversification across sectors of the stock market means, or for those trying to find effective ways to steward their investments, there are many valuable tools to give you information at a quick glance with the opportunity to drill down for more detail. I found one example of a good tool for sector analysis at Fidelity. You can start with a sector overview and drill down for more information within each sector.  I have included a picture below as an example of different sectors of stocks. In the live version, you can click on the “+” and drill down further on their website.

fidelity sectors

I hope these quick thoughts help you stay properly connected to your investment decisions!

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

Diversification, Plan Carefully and Seek Wise Advice, Tools

How Do I Diversify My Investments?

Congratulations to those of you who are ready to consider investing as part of actively managing your finances. Now… a common question is “How do I know how much to invest in what assets?”

Truly it can be overwhelming at first. To start, it is important to assess your personal risk tolerance. Are you wanting to take more risk for more potential gain or minimize risk and accept more modest returns?

There are lots of good tools online if you look for them. For example, Charles Schwab provides good information to get started investing on their How To Invest page. Vanguard also has a similar investor page to help you assess your risk tolerance to guide your investments as well as information on asset allocation. Fidelity.com also provides a lot of information for those getting started. There are many sites you can research, and you probably want to look around for more than one. Another example may be the Motley Fool, a funny name to be sure, but a good site.

There are also investment advisory firms like TradeSmith and Stansberry Research.  These last two will try to sell you investing tools or research. You can consider carefully and decide if or what you want to buy. For a few hundred dollars a year you can get good investment advice without a big financial commitment. If you are interested in managing your own investing more actively, some of their tools are worth considering.

Information on sites like these is available to a large extent even if you don’t invest with them. Of course, each website will have contact information for you to contact them and get more information.

It is important to get a feel for how you may want to invest and diversify your money. How aggressive or conservative do you want to be? Always consider that the highest returns generally bring the highest risk, meaning that you could lose money chasing high returns.

I encourage you to pray and take time to assess your comfort with the various risk/reward balance associated with different asset allocation approaches. Do not rush into investing. It is a long-term activity not to be hurried and decided in 30 minutes or even a single day. That said, you will never get there if you don’t get started.

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

Investing, Plan Carefully and Seek Wise Advice

Are Fear and Greed Really an Investment Strategy?

Warren Buffet is a well-known and well-respected long-term value investor. He invests in companies when he sees the cost is low relative to the value of the company and then sells later after the stock value has increased. He is not a day trader and typically invests with a long-term horizon. When Buffet speaks, many who want to make money investing will listen closely.

We should take caution whenever we put someone on a pedestal as a role model or guide for our lives. We should test what they say against what God teaches in the Bible to ensure we are not following a “false prophet” who appears to lead to prosperity but in reality leads to destruction or separation from God.

Whatever I may think of Mr. Buffet’s political opinions, he certainly has some real credibility with regard to investing.  One of his well-known quotes can actually be quite helpful in establishing a certain mindset for us to consider when we are investing.

“Be fearful when others are greedy and greedy when others are fearful.” Warren Buffet

I could certainly do a study on the words “fearful” and “greedy” and make a case that we should not literally let fear and greed make our investing decisions, but that would truly be missing Mr. Buffet’s point. What he is suggesting is that the average investor, and many professionals as well, have a tendency to allow emotions to guide their investing and not for the better.

When the market is priced very high, people get greedy and forget about the danger of a market pullback. The same investors who were too fearful of buying when stocks were low now jump in when stocks are high.  Then when difficulties around the world cause the same stocks to tumble in value, people become fearful and sell while stock values are low. This represents “buying high” and “selling low”, which is not a robust strategy.

Of course, Buffet is not suggesting we blindly buy when people are fearful, as we could easily buy stocks that are still going lower. He is simply suggesting that we take note of when people are widely fearful about stocks plunging down and look for bargains that we are confident will increase in value over a several-year time frame as market forces settle out. On the flip side when the market seems “unstoppable” and we are tempted to keep putting more money in… consider selling some of what you bought and taking profits. Then you are once again ready with cash in the account to buy the next time people panic and the stock values fall.

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

Control Debt, Control Spending, Generate Income, Greed, Investing, Optimizing Life, Treasures In Heaven

Contentment Is Essential for Financial Success

Financial success is not to be measured against an absolute standard of money earned or by comparison of net worth to others. There is always someone with more money. Financial success is achieved by matching our resources to our needs and desires while we humbly live for God and serve others. Finding contentment rather than coveting what others have is essential for finding this success. Then we are free to find our joy through relationship with Jesus Christ, who promises never to desert us.

Ecclesiastes 3:12 I know that there is nothing better for them than to rejoice and to do good in one’s lifetime;

Hebrews 13:5 Make sure that your character is free from the love of money, being content with what you have; for He Himself has said, “I WILL NEVER DESERT YOU, NOR WILL I EVER FORSAKE YOU,”

The United States of America is a wealthy nation. By global standards even many considered to have low income in the USA are relatively wealthy. Despite this relative wealth, most consider themselves to be living day-to-day or month-to-month. They genuinely feel that they are barely getting by. There is insufficient planning for the future, insufficient savings and little investment. There is much coveting and little contentment.

We could double the money everyone is earning, and I dare say the broad results would be largely unchanged. Many people would have more stuff they want (and do not need) but would be no better prepared for the future and still be unsatisfied because they don’t know how to be content.

For those who cannot find contentment with what they have, they may never have enough. There is always the potential to have more. The ability or willingness to be content provides a foundation for satisfaction in achieving personal success.

Of course, contentment should not be confused as an endorsement to be lazy. Instead, in proper context, contentment provides important balance in managing your work hours required to generate income, controlling spending and debt, in how you select your investing strategies… and opens wide the door toward giving to others and serving God.

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

Diversification

Diversify Your Investments

All of us inherently already know that we should diversify our investments. We grow up as children hearing such phrases as “Don’t put all your eggs in one basket.” If we recognize risk to any significant degree and act with some amount of humility that a decision, we make may actually not work out… we know already that we should spread out our risk when we manage our money. Solomon highlights this principle in Ecclesiastes.

Ecclesiastes 11:2  Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.

There are many asset classes to consider in order to diversify your investments. You are not limited to the stock market, though it can be an important part of a diversified investment plan.

  • Cash Equivalents include savings accounts, certificates of deposit, and other similar investments which offer a fixed rate of return. Most are insured by the Federal Deposit Insurance Corporation (FDIC) and are considered low risk.
  • Fixed Income includes investments like bonds in which you loan money to a government or business, and they agree to pay it back at a specified time with a specified interest, or return, on the loan.
  • Stocks represent investment in specific companies or across many companies. When investing in stocks it is important to actively do your homework. Those who do not have a lot of time to invest personally should consider diversifying within stocks through use of mutual funds or exchange traded funds (ETFs).
  • Real Estate includes any home or property you have purchased to live in/on, as these also go up or down in value over time.
  • Precious Metals / Commodities include physical assets like gold or silver or copper. They inherently have value that has been demonstrated consistently over time, though it may fluctuate up and down like other investments.

Even within a particular asset class you can diversify. For example, let’s assume you have $10,000 to invest in certificates of deposit (CDs). Instead of investing all of it in one CD with a duration of 2 years, you may consider separating it across multiple CDs perhaps with a “ladder” structure that has one maturing in 1 year, a second maturing in 3 years, and a third maturing in 5 years. You may even diversify further by getting CDs at different banks, though it may not be necessary if they are FDIC insured.

For a similar example with bonds, you would consider not putting all your funds in the same bond. You may consider getting some government and some corporate bonds… or invest in a bond fund or across two bond funds to diversify further. You could invest in bonds with different maturity dates.

Diversification helps to manage your risk and return. A diversified portfolio will not always get the highest returns, but neither does it get the lowest returns or carry as much risk toward losing your initial investment. Diversification is important across multiple asset classes but is also important within any one asset class.

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

Diversification, Proverbs, Speculative Investment, Treasures In Heaven

Start Investing In 5 Steps

For those of you who have established consistent income, a budget to control spending, gotten debt under control, established at least an emergency savings fund that is easily available to you in case you need it, and have money available in addition to that… you may be ready to consider investing.

Now you find yourself asking a common question:

“How do I get started investing my money?”

1- Establish your personal goals.

Before you start investing you should spend time clearly defining (and writing down) the objectives you are trying to accomplish.  Are you planning for college expenses for your children? a house?  retirement?

Defining your goals and writing them down helps to clarify for yourself what you are trying to accomplish with any investment, and it will help you make reasonable choices in investing to accomplish your goals.

2- Decide if you prefer to work with a professional investment advisor or go it alone.

If you work with an advisor, remember that they have other motives besides just your best interest (e.g. getting paid) and not all look out for you the way they should.  On the other hand, many of us are not prepared to invest effectively and wisely without a professional to help give us input and guidance. You are your own chief investment advisor. They provide helpful counsel, but you make the decisions. Consider verifying by researching online or meeting with more than one professional advisor separately and comparing notes.

With or without an advisor, you really need to do some homework to understand how to make good decisions.

3- Diversify your portfolio to manage risk and potential gain.

For example, let’s consider two cases:

Jack wants to invest and prepare for retirement. He is starting early and has time on his side. Jack wants to limit his risk exposure for his investment losing value and will be satisfied with a moderate return on investment.

Joe has a higher risk tolerance and is willing to consider more risk to achieve higher return on investment.

Diversify your portfolio consistent with your personal goals and personality. You need to be comfortable with your investment decisions. If you are nervous or lacking in confidence you may make poor decisions when unexpected events happen (e.g. 2008/09 stock market crash) and may make poor decisions. If you had a lot of your portfolio in U.S. stocks and then sold when the market bottomed instead of riding it out… you are really hurting.

4- Get Started.

Do not wait until you have perfect clarity on exactly what you will need to spend 20 years from now or more.  Do not be discouraged from starting because you think you do not have enough to make it worthwhile. Even if you are starting small, you are going to gain knowledge and experience along the way.

Set aside some designated funds to start investing toward your objectives. Open an account at a reputable broker or financial institution. Begin the investing journey.

5- Steward your investments regularly.

Verify your portfolio is on track to deliver your objectives. Make adjustments as needed consistent with changes in your plans or the performance of the investments. Continue on a schedule of investing additional funds consistent with your long-term goals.

Do not be afraid to admit you made a mistake and get out of an investment, if warranted. Establish conditions ahead of time that would indicate when you should exit an investment if it does not go well. Our human tendency is to hold on to our bad investment decisions too long hoping for them to turn around.

If you are uncomfortable getting started, begin with a small investment that you are not afraid to lose. Invest wisely and you will soon see a return on investment that will encourage you and give you more confidence.

Remember, choosing not to invest is also a decision… and it may cost you a lot of lost opportunity to grow your money over time.

Bring your finances and investments before God and ask for wisdom and blessing. Seek Him in all you do, and He will make straight your path.

Proverbs 3:5-10

5Trust in the LORD with all your heart
And do not lean on your own understanding.

6In all your ways acknowledge Him,
And He will make your paths straight.

7Do not be wise in your own eyes;
Fear the LORD and turn away from evil.

8It will be healing to your body
And refreshment to your bones.

9Honor the LORD from your wealth
And from the first of all your produce;

10So your barns will be filled with plenty
And your vats will overflow with new wine.

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

 

Investing

Do You Prefer a Roller Coaster or a Carousel?

Do you prefer a roller coaster or a carousel? This seems an unlikely question to be asked in an article about managing finances, but let’s consider it a bit further. Do not worry, we will come back and tie it in to financial investing in a short while.

Both a roller coaster and carousel provide the same basic concept… provide an enjoyable ride for those who choose to get onboard.  One is predictable and steady, relaxed pace and still enjoyable… delivering a pleasant experience and fulfilling its purpose for those who ride it. The other can be exhilarating, bringing forth strong emotions ranging from joy from an adrenaline rush to fear about what comes next. There are unexpected turns, it goes up and down sharply, and sometimes it seems as if the bottom may just fall out. It is important to know which ride you prefer for your personality and for both rides it is important to get on and off at the right times. (For a literal example here, I suggest when the ride stops moving.)

We have a similar choice to make as investors while we manage the money and other resources that God has provided to us. We have to decide where to invest… in bank accounts paying sometimes low interest or in stock markets… how much in each if we properly diversify to match our specific investing goals? For the money we invest in stock markets, are we investing in a long-term horizon of several years and satisfied with low risk and perhaps lower returns? or are we trying to trade in and out of stocks on a short-term horizon to embellish our returns?

For most of us, we would be well served to invest for longer term based on market and specific business fundamentals. That is a bit more like the carousel. Yes, it is important to know when to get in and when to get out, but you can sit back patiently and try to enjoy the ride… hopefully collecting dividends along the way.

For those who decide to trade… “please hold onto the bar”. The market may make sudden and inexplicable moves that you do not anticipate. It can be a real rush and it can be frightening. You must be disciplined and specific about your goals… about why you trade in a particular stock and re-evaluate your thesis if the situation changes. You must avoid the emotions of holding onto a losing position hoping it will become a winning one, but also avoid just getting out at the first sign of trouble. Many who are not ready for this step, and many even professionals who think they are, end up selling low when fear kicks in and buying higher when everything seems to be going well. This is most certainly not the strategy anyone would devise ahead of time… buy high, sell low.

The moral of the story… understand which ride is better suited for your personality… and with what percentage of your diversified portfolio. If you want to invest or trade… do your homework and set up specific investing or trading theses, or why you are getting in and why you would get out of a particular investment. What would change your mind? If you choose frequent trading… please hold on to the bar and try to calm your emotions… or you may just try to get off the ride at the bottom, while it is still moving.

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