Is Now a Good Time to Invest?
How is your retirement plan during this uneasy time?
Did you sell investments to keep from losing money when the market went down February 20 and days following? Did you know exactly when to get back in when it started its recovery? Did you lose money if you stayed invested until now?
How do we know what to do?
I like simple, dependable principles I can understand and apply.
One of the best things I’ve found is:
Bob Farrell’s 10 Rules for Investing
- Markets tend to return to the mean over time
- Excesses in one direction will lead to an opposite excess in the other direction
- There are no new eras — excesses are never permanent
- Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
- The public buys the most at the top and the least at the bottom
- Fear and greed are stronger than long-term resolve
- Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
- Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend
- When all the experts and forecasts agree — something else is going to happen
- Bull markets are more fun than bear markets
Bob Farrell’s Rules with commentary: Bob Farrell’s 10 Rules for Investing
To me, the key principles are:
#5. The public buys the most at the top and the least at the bottom.
#6. Fear and greed are stronger than long-term resolve.
If those are true, a person with a plan will do neither of those and profit by buying more shares when the price is low and less shares when the price is high.
Two ways I’ve tried:
- Dollar-cost averaging — investing a fixed amount on a schedule (month, quarter, year) whether the market is up or down. The market doesn’t affect the amount. You don’t check with your feelings (fear or greed). You planned. You do it. You buy more shares of a fund or stock when the market is down. You buy less when the price is up.
- Dollar-value averaging — investing by making your account grow by a fixed amount each investing period. When the market is down, you invest much more to make it grow the designated amount. When the market is up, you invest very little which will give you more to invest when it goes down again.
I’ve done both. I prefer dollar-value averaging. I have spreadsheets that tell me on the investing day each month how much to invest. Over several months, it averages the target budget. I invest much more when shares are cheaper, very little when the market is high. When the market rises, many shares are rising.
My suggestions:
Giving liberally to the Lord is a priority investment. Since the beginning of our marriage, we’ve given a fixed % of our income to the Lord. We sometimes give extra. We don’t use purposed giving for emergencies, great opportunities, or fun things that come up. Placing giving to the Lord first in our financial plan has worked well for fifty-six years.
Learn and practice good financial habits. I advise every couple in premarital counseling to take Dave Ramsey’s Financial Peace University and follow the plan.
Don’t opt out of Social Security. I’ve talked to many preachers who decided to get out of Social Security, buy life and disability insurance, invest the rest of what they would have spent on Social Security, and come to retirement age with much more. My observation: they followed the first suggestion of getting out of Social Security. They didn’t follow the rest of the plan and came to retirement with nothing.
Start investing for retirement as soon as you get out of debt (except for your house). Elders, shepherd your preacher, youth minister, and others under your care to use the money God gives them wisely.
Find an honest, wise, and helpful person to help you learn how to invest. The best way I’ve found to gain faith is by creative doubt. Ask friends and investigate their recommendations. I talked on a friendship level for ten years with the person who helps me before I started investing with him. I now recommend him to friends. He’s honest, wise, and keeps up with the latest trends and tools.
Invest following a proven plan — not by your feelings. According to history, the market will come back and grow. If our country is destroyed or climate change cooks us, no plan will work.
Disclaimer: I am not a financial advisor. I recommend everyone find a reliable person who’s trained to help in this important area of your life. Money isn’t the most important thing. But it’s important. It’s as important as giving to the Lord’s work, food, clothes, housing, transportation, and helping, encouraging, and enjoying spouse, children, grandchildren, friends, and strangers who are friends we’ve never met.
Jesus said we need to be faithful with money and have the right attitude toward it:
He who is faithful in what is least is faithful also in much; and he who is unjust in what is least is unjust also in much. Therefore if you have not been faithful in the unrighteous mammon, who will commit to your trust the true riches? And if you have not been faithful in what is another man’s, who will give you what is your own?
No servant can serve two masters; for either he will hate the one and love the other, or else he will be loyal to the one and despise the other. You cannot serve God and mammon (Luke 16:10-13, NKJV).
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I agree with most of what you suggest here, Jerrie. But I cannot agree with the part about not getting out of Social Security. If one got out of it for economic reasons, that may have been illegal. If one got out of it for reasons of conscience (like I did, and as the law seems to indicate as the only reason one can get out of it) then it was the right thing to do, even if one starves as a result.
You are correct about the right reason to opt out of Social Security. Most people I’ve talked with used the money for something else and didn’t invest.