Making the “Right” Investing Decisions in 2021 – and Beyond

Dec 22, 2020
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Having lived through one of the most unusual years in market history in 2020, investors are wondering what 2021 holds: More record highs? A steep decline? Both?

You can find plenty of articles on financial websites purporting to tell you the “right” moves to make for the new year. But the reality is, because we can’t know the future with certainty, no investment portfolio can ever be perfectly positioned for unfolding events. A year from now, each of us will be able to look back and point to ways we could have made more money (or lost less money) than we did.

It is this human inability to make fully accurate predictions that makes it pointless to think of the “right” moves or the “right” investment portfolio solely in terms of making the highest possible profit. Instead, the “right” choices for you are ones that realistically face where you are right now, look years ahead to where you want to go, and have a high probability of getting you there.

Purposeful movement

With that in mind, here are a few pointers that will ensure that you’re moving in the “right” direction.

  • The right investing decision is one consistent with a specific, biblically sound, long-term strategy you’ve adopted. Many investors have portfolios that are a random collection of “good deals.” Each investment appears to have been made on its own merits, without much thought of how it fits into the whole.

    They might have an incongruous collection of savings accounts (because the bank once offered a “good deal” on money-market accounts), company stock (because buying it at a discount is a “good deal”), a whole-life insurance policy (because their agent said it was a “good deal” for someone their age), and 100 shares of XYZ stock (because their best friend clued them in on this really “good deal”).

    Those who hold this kind of random assortment of investments, rather than operating from a coherent plan, are what SMI calls responders (i.e., people who react to outside information, making decisions on a case-by-case basis). We urge you instead to be an initiator (i.e., one who develops an individual investing strategy tailored to your personal temperament and goals). The right step is the purchase of investments that you seek out purposefully, knowing where each fits into the overall scheme of things.

  • The right investing decision is one you’ve taken time to pray over, and about which you have sought experienced Christian counsel. Don’t be in a hurry. You’re not under pressure to make this year’s big killing. Your goal is to settle into a comfortable investing lifestyle that will serve you well for decades.

    You need time to pray, ask for the counsel of others, and reflect. You should consider the alternatives and examine your motives. If you’re married, pray with your spouse and talk it out until you reach agreement. You’re in this together and, come rain or shine, you must both be willing to accept responsibility for the decision. (This will add to your steadfastness during the occasional rough sledding along the way.)

  • The right investing decision is one you understand. You don’t need a complicated approach. In fact, just deciding what percentage of your investments to put in stocks (where your return is uncertain) as opposed to bonds and other fixed-income investments (where your return is relatively certain) probably will have more influence on your results than any other investment decision you make. (This decision isn’t required, however, when using SMI’s Dynamic Asset Allocation strategy. DAA employs a different approach.)

    Skip the complicated stuff and educate yourself on the basics. The right investment step is the one where you know what you’re doing, why you’re doing it, and how you expect it to improve matters.

  • The right investing decision is one that is prudent under the circumstances. Investments that offer higher potential returns also carry greater risks of loss. How much of your investing capital can you afford to lose and still have a realistic chance of meeting your financial goals?

    The right portfolio for you isn’t always the one with the greatest profit potential. For example, it’s usually better not to have a majority of your investments in a single asset or security. For that reason, people who have large holdings of stock in the company they work for may sell some of it to diversify.

    Suppose the stock were to double after they sold it? Would that mean they did the “wrong” thing? No, they did the right thing. After all, the stock could have fallen dramatically as well as risen. What would a large loss have done to their retirement planning?

    The right investment step is the one that protects you in the event of occasional worst-case scenarios. Generally, this moves you in the direction of increased diversification.

The right stuff

Many people find investing to be a nerve-racking, if not downright scary, experience. Anxiety and the fear of doing the “wrong” thing cause many people to “freeze up.” They become frightened into inaction.

SMI wants to help you move forward with confidence. That doesn’t mean you’ll get everything perfect. Investing deals with probabilities, not certainties.

As 2020 demonstrated all too well, life is unpredictable! But once you understand SMI’s core concepts, you are well equipped to make basic investing decisions. Indeed, you’re ready to make the investing choices that are “right” for you — year-in and year-out.

Written by

Austin Pryor

Austin Pryor

Austin Pryor has 40 years of experience advising investors and is the founder of the Sound Mind Investing newsletter and website. He's the author of The Sound Mind Investing Handbook which enjoys the endorsements of respected Christian teachers with more than 100,000 copies sold. Austin lives in Louisville, Kentucky, with his wife Susie. They have three grown sons and many grandchildren.

Joseph Slife

Joseph Slife

Joseph Slife has been a news writer for the Associated Press, a college instructor, and a radio host. He and his wife Joye have three grown sons.

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