The rapid market decline has many investors wondering what to do. SMI executive editor Mark Biller had advice on Monday's MoneyWise Live from Moody Radio.

To listen to a portion of the program, click the play button below — or, if you prefer, scroll down for the transcript. (And for more radio appearances by members of the SMI team, visit our Resources page.)

MoneyWise Live, with hosts Rob West and Steve Moore, airs daily at 4:00 p.m. ET/3:00 CT.


Transcript

Steve Moore:  "Panic on wall street" — that's next, right here on MoneyWise Live.

Well, Rob, Mark Biller is the executive editor at Sound Mind Investing, where they always take a long-term approach — and unless Chick-Fil-A runs out of nuggets, they never panic.

Rob West:  Mark, delighted to have you with us today on MoneyWise Live. Good afternoon.

Mark Biller:  Good afternoon. Glad to be back with you.

Rob West:  Well, we're thrilled to have you here, especially on an eventful day in the market. According to my screen, Mark, we barely missed the "down 3,000" — but we were as close as you get down 2,999 points on the Dow Jones today. 

It is a tumultuous time. There's a lot of fear out there. Tell us how you're observing this as someone who knows the counsel of Scripture but also studies markets and investments for a living.

Mark Biller:  I think that sometimes it's even hard for people to know "how do I even translate what you just said about those number of points and all this" — but at this point, basically the market is down almost 30% from its highs in mid-February. And you know, that's a, that's a staggering number for such a short period of time.

I think for context — the last two bear markets that we had in 2000 and 2008 — overall, those losses, both times, ended up in the roughly 50% range. So that's considered a very bad bear market. A lot of them are not that bad, but we've seen a couple in the lifespans here have a lot of current listeners that have been about 50%. We're at about 30% now in this one.

Now the big difference, of course, has been the speed. So both of those other bear markets unfolded much more slowly, and it is very disconcerting to a lot of people to see these types of declines happen so quickly.

Now, obviously the big wild card here is this coronavirus. We don't usually have an external event like this driving the show and that that layers on a whole different level of fear because it's kind of a one-two punch. We were dealing with the health implications — what I would call like the "real-life" implications. And then we've also got this financial situation that's unfolding day by day in the markets.

So it is important to stay grounded in God's word. It is important to understand a little bit of market history because it does help give us context and realize this isn't like the worst thing that's ever happened in the markets and that we probably will get through this as well. But it certainly is a trying time for a lot of investors.

Rob West:  What we've also seen — that's unprecedented here — is just the sheer amount of volatility. For instance, last week, if I remember correctly, we were up or down each day, 4% or more. And that is — well, we've never seen that before. Have we?

Mark Biller:  Yeah. Not since 1929, which of course we all learned about in the history books as a pretty dark time for the markets. So, yeah, that volatility has been been a big piece of this.

And also Rob, you know, what also is kind of throwing people a little bit is some of the other traditional safe havens like gold, like even bonds. You know, we always talk about diversifying between stocks and bonds for safety. Well, last week U.S. corporate bonds lost 7%. Now that's a whole lot better than the stock market, but we don't usually expect that from bonds during a period of upheaval.

So it's been a little disconcerting and some of this will shake out in the wash as markets just relax and find their footing a little bit. But it definitely has been a shock to the system for sure.

Rob West:  Well, there's no question about it and everything you just said about even some of those safe havens not being a place of any kind of positive performance just underscores this idea that this is not the time to be making changes in your portfolio. This is a time to turn down the noise of the world, stick to your plan, stick to prudent wisdom, which we know comes right out of God's word and stay the course. Right, Mark?

Mark Biller:  Yeah, that's absolutely right. We always talk about the importance of having a plan — and a lot of the time, you know, I think that kind of goes in one ear and out the other because in a bull market you don't really need a plan. You just throw a dart and usually, things are going to work out okay. But you get into a period like this and you realize just how important it is to have a game plan that you can stick with when your emotions are ratcheted up all the way to 10

Rob West:  Mark, we're going to talk history in just a moment and talk about what we can draw from prior bear markets that could perhaps give us some comfort about where the market is headed from here. But first I want to go back to God's Word.

You know what we do — as you well know — every day here on MoneyWise is really look to the counsel of Scripture, to understand God's heart as it relates to his resources. Remember what we have in the stock market — everything that comes through our hands — is God's and we're his manager. And by investing, as long as we're using biblical wisdom and principles, we're doing exactly what the Lord told us to do. And yet we want to understand his heart as it relates to some of these uncertainties as well.

You really dive into that a good bit in the article you wrote today — again, it's entitled Faith, Fear...and Caution — and what do you glean from God's Word in this area of replacing fear with faith?

Mark Biller:  Yeah, well, you know, it's worth pointing out that the very name of our organization, Sound Mind Investing draws from exactly what we're talking about today. Second Timothy 1:7 says, "For God has not given us a spirit of fear but of power and of love and of a sound mind."

And that rejection of fear — I mentioned in the article that I've never personally verified this, but I've heard that the Bible says not to fear 365 different times in the Bible. So clearly whether that's precisely accurate or not, there are a lot of admonitions to not fear. And I've found over the last few weeks as I keep coming back to scriptures like Philippians 4:6-7 about bringing our requests to the Lord in prayer and "the peace of God," transcending all understanding, "will guard our hearts and minds in Christ Jesus." 

Fear is clearly not the response that we're supposed to have. And that's where the title of this article, "Faith, Fear...and Caution," comes in. If fear is not to be our response, what is? Well, some balance of faith and caution — and I think we've got reason for both given what we find in the historical data

Steve Moore:  Mark, if fear is not to be our response, is that synonymous with "concern" or "prudence"?

Mark Biller:  Yeah, and that's really where I go in the article here, Steve, because I, I don't think that it's fear — let's take it outside the investing arena a for a second and deal with what we know about the virus. It's not being fearful to follow the counsel of medical experts and follow best practices there — washing our hands, the social distancing, that kind of stuff. That's just being prudent and cautious.

In the same way, there are financial best practices, the very same things that you guys teach and MoneyWise Live and we teach at SMI that are not being fearful. They're being cautious and prudent. These are things like living below your means, having an emergency savings fund, minimizing debt. Those are all steps that hopefully listeners have been putting into practice already to prepare for a time like this.

And we can take that a step further into the investment realm where we've talked about the need to have a personal investing plan, whether that's something you're implementing on your own or with the help of an advisor. Hopefully, you've got one ready and you're ready to work your plan now that you have it. If you don't have it, I'm sure that this episode is reinforcing the need to develop that — and that's something that we can help with at SMI or an advisor can help with. But there are certain specifics in the historical data that also give us some reason for comfort and for hope as well.

Rob West:  Mark, I know the research department there at SMI has been working extra hours. You've been looking back in history to really determine in periods like this where there's been a bear market. And again, this one is a bit outside of the normal range just in terms of how quickly we got here. But the percentage down is not outside of the range when it comes to bear markets of history. But we have the ability to see where we might be historically speaking a year from now, for instance. So give us some context that will help us put what we're facing into perspective.

Mark Biller:  Yeah, so as we look at the historical data, and these are averages from past bear markets, we can see that there's a very clear trend that the lower the market goes from its highs — in other words, the bigger the decline — the better the longterm performance going forward is. And the comforting factor here is that on average following declines like this, we see very good performance over the next six months, a year, three years, five years, and so forth on average.

Now, the problem with that is during a bear market, we need to also keep a very close eye on what the worst-case scenarios are. And those worst-case scenarios indicate that we may still have further to go in the decline.

However, those longer-term averages can give us confidence that — like for the person who's dollar-cost averaging into their 401(k) — we're not, we can't necessarily say that the bottom is then based on the historical data, but we can say that someone who has, say, a 5- or a 10-year timeframe, they're probably going to be looking very favorably back on money they invested now throughout this bear market, because on average those returns have been very good once the market has declined the way it has today.

So to be not calling a bottom here, unfortunately — I wish I could do that for everybody. However, on average, looking out three, five, 10 years, we probably can expect better returns now going forward than we could before because these valuations have been coming down and getting adjusted down.

Rob West:  Well, that's right. And if I follow biblical wisdom and I'm a "steady plodder" with a long time horizon, Mark, [and] I've got a plan that fits with my age and stage of life and my God-given goals and objectives, then what I realize is the money that I had in the market that has declined is what's called a "paper loss," right? I don't "realize" that loss unless I sell it.

And so if history plays out — and it has every time this has happened previously — and that is going to fully recover in time and get back to the levels it was. But with my systematic investments — the new dollars I'm putting into my, let's say, company-sponsored retirement plan — I'm dollar cost averaging in, I'm going to be able to buy more shares with the same money. And that's going to be appreciating with the money that was already in there.

Mark Biller:  Yeah, that's exactly right. I mean, there's nobody today that's looking back at 2008 going, "Man, if I had only stopped my 401k contributions in mid-2008." They're glad they put that money in because it's grown since then.

Rob West:  Mark, always a delight to have you here, my friend. You bring reassurance and you focus back on God's Word, which is where we need to be. Thanks for stopping by.

Mark Biller:  Well, thanks for having me guys,

Steve Moore:  And again, the name of that article, the title of the article, Faith, Fear...and Caution. You'll find it available to read and check out for yourself at soundmindinvesting.org.