Originally posted on the Christian Post on March 3
To learn Biblical answers to your financial questions, you can #AskChuck @AskCrown your questions by clicking here. Questions used may be lightly edited for length or clarity.
Every time I turn on the news, I hear reports about new record highs in the stock market. I have some stock investment, but wondering if I should go bigger. Is there something I should be doing to take advantage of the energy in the stock market?
Stock Market Newbie
Great question! With a recent report in The Balance noting that the Dow Stock Market “has set 24 new record closing highs since the 2016 Presidential election,” many people are wondering the same thing. No doubt, the market is riding a surge in optimism at the moment! The Goldman Sachs Risk Appetite Indicator hit its historic high in early 2017.
Before I tell you how you might take advantage of the current market, it’s important to lay out a course of action for surviving and even thriving whatever the state of the economy. My personal view is there remain a number of significant potential threats to the global economy: America’s massive federal debt, China’s struggling economy, the possibility for trade wars, BREXIT, the list is extensive. So while our economy seems strong right now, the greatest risk we face comes from fluctuations in the world market. It is good to continue to use caution and discernment in your investing approach, especially as a novice. In my book, The S.A.L.T. Plan, I outline some basic steps to be prepared for a massive market correction, using the themes: Save, Asset Allocation, Liquidity, Truth.
First: SAVE. All investing needs to be accomplished with funds available AFTER you’ve set aside adequate savings. Every person needs a working budget to make sure that you have handled your responsibilities, and you need savings so that emergencies don’t result in debt, especially credit card debt. In Genesis 41, Joseph recommended to the Pharaoh that 20 percent of all resources be set aside in prosperous years. When times are good, save more.
Second: ASSET ALLOCATION. Investing carries risk that must be carefully considered. It’s important to diversify your resources so that a downturn in any one area is not devastating. Ecclesiastes 11:2 advises, “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” Even when the stock market is growing strongly in any one segment, avoid putting more than 12-15% of your investable assets into a single sector such as precious metals (gold/silver), commodities, real estate, bonds or blue chip stocks. If you don’t understand what you are investing in, better not to invest at all!
Third: LIQUIDITY: Financial setbacks often take place when you need resources today. The best financial plans look not simply at retirement planning, but cash flow plans throughout an entire life. For example, how available are your resources for your children’s college plans? Do you have cash set aside to replace that aging roof? We have on-going needs for resources, so be careful to keep some readily accessible. Be cautious to avoid having all of your investments in long-term, tax deferred instruments that carry a penalty if you have a need to suddenly access your cash. Evaluate your cash needs before putting away all your money in a 401(k).
Fourth: TRUTH. It’s important to remember biblical truth about our resources and the purpose they fulfill. God is the owner of all that we have, and we are accountable to Him for how we use our wealth. It’s also important to remember that our plans may not come together as we imagine, so stay close the Lord. In James 4:13-15 we read a warning about arrogance.. “Now listen, you who say, ‘Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.’ Why, 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. Instead, you ought to say, ‘If it is the Lord’s will, we will live and do this or that.’”
So, Time to Invest? Proverbs 21:5 observes, “The plans of the diligent lead to profit as surely as haste leads to poverty.” My advice is to determine how much you can afford to invest (put at risk) and begin investing that amount each month. Steady investing over time is a strategy experts call, “dollar cost averaging.” Some days you will invest when the cost of the investment is up, other days you will invest when the cost is down. The important factor is to avoid trying to time the market.
Next, take a look at your cash flow needs and consider whether it is time to cash out a few investments. If you know of a coming expense, sell some existing investments at the top of market so that you have cash on hand for your needs. This may be the right time to get the highest return from some of your investments.
But you don’t have to do this alone. When it comes to investment, experienced counsel is always a good idea. Proverbs 12:15 says, “The way of a fool is right in his own eyes, but a wise man listens to advice.”
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Chuck Bentley is the CEO of Crown, the largest Christian financial ministry in the world, founded by the late Larry Burkett. He is an author, host of My MoneyLife - a daily radio feature, a columnist for the Christian Post, and a well-known speaker. Follow Crown @CrownUpdates. For interviews or speaking requests contact email@example.com.