Anyone can become a wise and faithful steward in the area of investing. You just need to be teachable!

By 2012, Sound Mind Investing managing editor Matt Bell had 20 years of experience writing and teaching about biblical money management. But then he joined the staff of SMI. And that, he says, is when his education as an investor truly began. In a recent conversation on the popular radio program, MoneyWise, Matt explained some of the key lessons he has learned. They are lessons we hope everyone who is part of the SMI family has been learning as well.

To listen 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, with hosts Rob West and Steve Moore, airs daily


Transcript

Steve Moore:  Avoiding financial mistakes is an important goal, but so was investing for the right reasons. Today, host Rob West explores that and more with Matt Bell of Sound Mind Investing. I'm Steve Moore. "The education of an investor" — next right here on MoneyWise.

Rob, our old friend, Matt Bell is managing editor at SMI and the author of four books on personal finance. He joins us now to talk about a personal journey he's been on for the last eight years or so. And to share what he's learned along the way about investing.

Rob West:  Matt, Great to have you back with us on MoneyWise.

Matt Bell:  Thanks so much, Rob. Really good to be with you guys.

Rob West:  Tell us a bit about this story. You know, I think many listeners will be able to relate to what you have to say that you were something of a newbie when you started at Sound Mind Investing. So why don't you pick up from there and tell us how God's been working?

Matt Bell:  Sure. When I joined SMI in April of 2012, I had more than two decades of experience writing and speaking about biblical money management. And I felt, you know, honestly I felt comfortable. I felt well equipped, well taught to be able to convey biblical principles about money. And I knew how to teach people, things like getting out of debt because I had gotten out of debt.

So I knew some of the essentials of money management from a biblical perspective, but I would have been the first to say that when it came to investing, that was truly my weakest link. I mean, I could talk a mean game about asset allocation and getting the right stock/bond mix for your age and risk tolerance, but that's about as far as it went. So my education as an investor really began when I joined SMI back in 2012.

And as I've thought back over the past eight years, I've seen certain lessons I've learned and I've kind of bucketed them into three categories if you will of faith, knowledge, and action. And those are areas that we hope to impact everyone that we have a chance to influence through our work at SMI.

Rob West:  Let's start with faith. What has your time at SMI taught you about the importance of faith in our financial decisions and specifically in the area of investing

Matt Bell:  Quite a bit! In fact, it really started before I technically joined SMI. I was talking with my wife and we were praying about the decision to join the staff of SMI. And as we were going through that process, it was really helpful to read the book that Austin Pryor, SMI's founder, wrote — The Sound Mind Investing Handbook.

In the back of the book, which is where I recommend people start with that book, Austin tells his story. And he tells it very candidly, tells it with a very personal perspective on the mistakes he made with money, the lessons he's learned over time, how it's impacted his faith, how he's grown in his relationship with Christ — and it was very inspiring to read all that.

And, you know, Rob, of course, the Bible says many things that have a direct application to investing — everything from diversification, to taking a long-term perspective when it comes to investing. But there was one thing that Austin wrote that really, I think, above all, caught my attention. And he said this, he said, "I've become convinced that it's ultimately impossible to self destruct financially if your decision making is pointed in the direction of God's glory. I'd never really heard it unpacked that way. And it really impacted me —and it still impacts me. So my wife and I have tried to embed that process, that question into all of our financial decisions: "Will this bring glory to God?"

Rob West:  Yeah. It's such a simple, and yet a profound idea that, as you said, can radically change how you make decisions in this area of managing God's money and ultimately the results. It involves you holding everything with an open hand, holding it loosely, and thinking about the eternal significance of what you're doing in your role as steward, which is just so very critical. I love that. Is this decision in the end pointed in the direction of God's glory? And, boy don't, we all want to avoid self-destruction financially speaking among other areas in our lives.

Talk for a minute about the importance of knowledge — and part of that is knowing what to do, right?

Matt Bell:  That's exactly right, Rob. One of the things I really appreciate about Austin's philosophy is that he wants us to teach people what they need to know about investing, not everything there is to know. And quite honestly, that takes the pressure off as a writer. But I think it's also helpful hopefully for the reader that we're not just burying people in detail, but really giving them the essence of what they need to know.

But the thing is that even in that realm of what we need to know, we believe that God's people really need to know quite a bit. And so one of the things that I've learned over the past eight years is the importance of the reality that the market moves through cycles. Now, for someone with a bit of experience with investing, they understand that, so that might sound pretty basic. But I've gained a much greater appreciation for what that means.

What are the implications of that? You know, if the market is going to cycle between bull markets and bear markets, well, I should expect, you know, not a smooth journey along the way. It should help manage my expectations. You know, throughout time, I mean over a long sweep of history, the market has averaged about a nine or 10% return, but the market has hardly ever delivered that in any given year. You know, it goes up some years and down other years, and even within a given year, it will move up and down quite a bit. And so understanding that really helps to manage expectations and helps you stay in the game.

Steve Moore:  Yeah. And that's certainly what we've been seeing for the last several months, lots of ups and downs. A key lesson, obviously: stay on course, don't react to all those ups and downs of the market. What else, Matt?

Matt Bell:  One other thing I've learned is to better understand investment news. I remember when I first started at SMI, I mean, I had read things about investing along the way, because I'd been interested and involved in stewardship ministry for a long time. But when I really started focusing on investing and started looking at sites like MarketWatch, for example, I was kind of disturbed, because one minute you'd see a headline painting a very optimistic picture of the future of the market. And it seemed like within the same hour, on the same day, you'd find a very negative perspective about the market.

And so I found that at first kind of disturbing, but today I've learned to just kind of laugh at that a little bit and realize that a lot of these folks writing these articles, it's just their opinion. It's their best estimate of what may happen. It's not necessarily true.

Rob West:  Yeah, that's exactly right. And that really uncovers Matt, uh, some inherent biases we have that we may not even realize isn't that right?

Matt Bell:  Quite a few of those, I mean, there's "recency bias" where the most recent information we take in tends to influence us. There's "confirmation bias," where we tend to glom onto articles that agree with our point of view that we had already before we started researching. And I think the most important bias that I've discovered, and that has really helped me as an investor, is what people call "loss aversion." And that's the idea that we tend to feel the pain of loss to a much greater magnitude than the, than the pleasure or satisfaction of an equal gain. And so when the market falls, I've learned to just tell myself it's natural to feel a little uneasy about that. But yet I don't need to necessarily act on that.

Rob West:  Well, speaking of "act," let's transition to our final lesson and that's taking the right action. Why don't you unpack some of the lessons you've learned in that area?

Matt Bell:  Sure. One of the most important lessons is that I've seen over time in myself before I joined SMI, and I think it's a fairly common thing, that we tend to get attracted to or drawn in by ideas of what to invest in too quickly. We see a headline or we hear somebody talking about a certain investment. Whereas I think it's much more important, what I've learned is it's much more important to focus on process or the particular investment strategy and let that guide your decisions.

Rob West:  That's exactly right. And I'm sure you pique some interest when you talk about a trustworthy investment strategy. Talk about what goes into that, because I think if we're all honest, we want a trustworthy investment strategy, but perhaps we don't know what are the key ingredients for that?

Matt Bell:  Yeah, I think that's right. So I would unpack four elements of what I think of as a trustworthy investment strategy. And the first one — I believe most importantly — it should be completely objective. There are lots of opinions out there. There are lots of scary headlines. There are emotions to contend with. But I want a strategy that I'm going to follow as a good steward to be objectively designed. It should use metrics that are rules-based. It should have a process that doesn't involve opinion or emotion.

And the second thing is clarity. I should understand as a steward of God's resources, I should understand the decisions I'm making or the process I'm following. In fact, I think a good test would be, can we explain it to a 12-year-old? And since my wife and I have a 12-year-old, it's kind of handy that we can test things out on her. But if you don't have one, maybe your neighbor has a 12-year-old, you could see how well you really understand your investment process.

Number three, I would say is a track record. It should, we should be able to look back on history and say — look, it's not going to be a perfect predictor of how this thing will work in the future — but I should have some understanding of how it has performed in good markets and bad markets, which will help manage expectations.

And then last is what I would call conviction. And what I mean by that is we should understand what it takes to follow our strategy of choice, and we should be willing to do it. We should be willing to make whatever trades are necessary on a timely basis, and we should be willing to and confident enough in the strategy we've chosen to stay with it in good times and bad.

Rob West:  And that includes seeking some wise counsel, whether that means engaging with SMI and following the strategies that you all put out or engaging with a professional, either at SMI or somewhere else. But wise counsel is really a big part of this, isn't it?

Matt Bell:  Yeah, absolutely. I mean, that's a biblical principle. So I think investing is one of those things where it's difficult to do it completely on your own. So certainly seek out wise counsel.

Rob West:  Well, this is great advice, Matt, we've only got just about a minute left. So sum this up for us because you really have a goal at SMI that's quite a bit more than just making money.

Matt Bell:  That's right. I mean, people come to us for help with their investments and we want to help people grow their resources for the purposes of providing for their family, which is a biblical and noble goal. And also for the purpose of investing generously in God's kingdom work. And so that's really the heart of what we do. And so we want to help them in very tangible ways with their investments. But of course, we want them to grow in their understanding and their application of what it means to be a steward of God's resources. And ultimately, we hope that along the way, people draw closer to Christ.

Rob West:  Well, you're certainly doing a great job at it. It's a privilege for our team at MoneyWise to partner with SMI. And we're just so grateful for our friendship and the work that you're doing to educate the body of Christ. Matt, thanks for being with us today, my friend.

Matt Bell:  Thank you so much. I really appreciate the opportunity.

Steve Moore:  Matt Bell is managing editor at Sound Mind Investing. You can read the article we've been discussing today, The Education of an Investor, at soundmindinvesting.org.