When it Comes to Your Money, Make Wise Decisions and Trust God with the Outcomes! (Oct 2022)
Reacting to market changes is not the way to grow your long-term wealth (or live your life)!
If you’re part of the 58% of Americans that own stock according to Gallup Research, then chances are it can be tempting to turn on the news each morning (or check an app) and experience an emotional roller-coaster in response to market changes. Depending on the day you can go from a sense of security to a mindset of worry.
These instincts are very human and understandable, but they’re harmful.
An important thing to understand about the stock market is by the time you see the news, all of the changes and variables affecting stock prices have already been priced into the market. That’s what is meant when saying a market is “forward-looking.”
Stock prices reflect an investor consensus of what’s expected to happen in the near future, not a response to what’s already happened. This is why markets often seem to improve before the news turns positive. Other investors already know the same information that you do, and any changes you make now in response to the market will likely be too slow to have the effect you’re hoping for.
Long-Term Investors Get to Participate Rather than Predict
It’s important to remember 90% of all investment assets are handled by big institutional investors. These professional investors drive the market prices in large part through their predictions and expectations. They do this full time, have access to powerful computing and analysis tools, and they sometimes still make wrong guesses and lose spectacularly.
But as an individual investor, you don’t need to play this predictive game. You can participate and ride along with long-term rise in markets without taking the same level of risk. In the book of James, we are reminded that our predictions are folly when God is in charge of the outcomes.
Come now, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business, and make a profit.” “You do not even know what will happen tomorrow! What is your life? You are a mist that appears for a little while and then vanishes” (James 4:13-14 NIV).
We’ve seen that year-over-year growth for long-term, diversified investments tends to hover very reliably around 10%. This long-term average includes booms and busts, periods of prosperity and the worst recessions. In the short term, markets remain uncertain. But in the long term, viewed over decades, the returns for diversified portfolios are very consistent.
Worry is Optional
“Can any one of you by worrying add a single hour to your life”
How do you prevent yourself from playing the market timing game and always falling a step behind?
- Remove yourself from worry and stop trying to outguess the market.
- Replace your predictions with process and patience. This change in mindset helps you release the feeling of control and allows you to view money as a tool…just as God intends.
If the stress becomes overwhelming, take a market sabbatical. Walk away from the news. Spend some time with your family or doing work in your community or volunteer at your church. Sharing our time and resources with others has a way of grounding us in times of financial stress. Your time and energy will be better spent making a difference than worrying over financial markets and other things outside of your control.