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Christian Living

Finance

Things Are Not As They Seem

Money

Sorting out the real from the illusory is one of the great challenges in investing, as in life. There's often a disconnect between our perceptions and the underlying reality. Things are not as they seem. For example:

Ownership seems natural. We have houses and cars in our name. We have money and investment accounts in our name. We feel like they're ours. But they're not. They're God's. He's merely placed them temporarily in our charge. Someone else will have "our" wealth after we're gone. Seeing this clearly can not only have a great effect on our giving, but also our lifestyle spending and investment risk-taking.

Investing seems complicated. The investment industry often makes it appear that way, but it doesn't need to be. There are essentially just two kinds of investments—those where you lend money, and those where you own things. How you divide your investment money between those two groups is the most important thing. Everything else is fine tuning.

Professional help seems essential. For the average investor, it's not. If you master just a few basics, you can do it yourself. We regularly receive thank-you letters from people who had no financial training saying they feel liberated now that they've taken charge of their investments. Some of them are from widows who have been forced to take up the task.

Timing your buying seems important. Actually, the important thing is not so much when you buy, but that you buy and continue to buy. One study we did compared an investor who was able to invest all his IRA money at the market low every year with another investor who simply did his investing at the end of every month. There was less than a 1% difference in their annual returns over a 30-year period. Being consistent in your dollar commitment is much more important than your timing.

Selling under fire seems prudent. When the market is falling, there's a tendency to want to move aggressively to protect your capital. Whether you should depends on your age. It makes sense if you need to cash out your stock fund investments in the next 3-5 years for retirement spending. But otherwise, you've got it all wrong. During the investing phase of your life, you're going to be a net buyer of stocks for many years to come. You want your monthly investing dollars to stretch as far as possible, acquiring as many stock and stock fund shares as you possibly can. And that happens when prices are down. Stock prices that are being battered by a weak market work in your favor, allowing you to stockpile shares to the max.

There are more investment illusions we could talk about—e.g., that markets behave rationally and there's a sound-bite explanation for each day's price movements, that advanced reading and studying inevitably lead to better returns, that the gurus we read about and see on TV have reliable insights into stocks' future direction, and that picking mutual funds based on their long-term track record is the most sensible approach.

But beyond these investing misconceptions are bigger life-size issues. Paradoxically, seeking what seems good (wealth and success) can actually be bad for us, and accepting what seems bad ("trials of many kinds") can actually be good for us.

Understanding this gives us a certain peace. Our confidence is in God, who is always at work behind the scenes for our good. There are times it doesn't seem that way, so we remind ourselves to take His word for it (see Romans 8:28-39). This truth is beautifully expressed in the Prayer of an Unknown Confederate Soldier:

"I asked God for strength that I might achieve. I was made weak, that I might learn humbly to obey.

I asked for help, that I might do greater things. I was given infirmity, that I might do better things.

I asked for riches, that I might be happy. I was given poverty, that I might be wise.

I asked for power, that I might have the praise of men. I was given weakness, that I might feel the need of God.

I asked for all things, that I might enjoy life. I was given life, that I might enjoy all things.

I got nothing that I asked for but everything I hoped for.

Almost despite myself, my unspoken prayers were answered. I am, among all men, most richly blessed."

 

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