When the investing waters get choppy, you're more likely to remain safe if you stay in the "boat." That's a metaphor for avoiding rash decisions and sticking with a well-considered investment strategy.
This morning, on the American Family Radio edition of MoneyWise, SMI's executive editor Mark Biller talked with host Rob West about why it's crucial not to jump ship.
The audio is posted below. Scroll down for a transcript.
For more radio appearances by members of the SMI team, visit our Resources page.
"But when [Peter] saw the wind, he was afraid and, beginning to sink, he cried out, 'Lord saved me!'" — Matthew 14:30.
Hi, I'm Rob West. The account of Jesus walking on water and Peter attempting to join him is generally associated with faith. But does it hold a message for investing as well? I'll talk about that with Mark Biller today. This is MoneyWise from American Family Radio — biblical wisdom for your financial decisions. (theme music ends)
Well, Mark Biller is back with us today. He's executive editor at Sound Mind Investing, where they almost never attempt to walk on water — unless you count water skiing. (chuckle) Mark, great to have you with us today!
Thanks, Rob. Good to be back with you.
Mark, what does trying to walk on water have to do with investing? Why don't you connect the dots for us?
Yeah, sure Rob. You know, before we dive in, I need to explain the title of the article we're talking about, which was, If You Want to Arrive Safely, You've Got to Stay in the Boat. Now, our title is a little word play on an excellent book by John Ortberg that he called, If You Want to Walk on Water, You've Got to Get Out of the Boat.
So, years ago we ran an excerpt from that book in our SMI newsletter. And we used that contrast between getting out of the boat and our faith walk with Christ versus the boat as investors — with "the boat" in this latter case being a well-thought-out and personalized investing strategy. So that's kind of the setup for today's conversation — just so that'll make a little more sense as we go through that.
So with that in mind, you know, let's go to Matthew 14, where we find this story of Jesus walking on the water. And Peter, as enthusiastic as ever, wants to come out and join him. So Jesus tells him to come. The first few steps go really well, but as most of your listeners are familiar, Peter then notices the wind, he becomes fearful, begins to sink, and cries out to Jesus to save him. And as Jesus saves him, he admonishes Peter for having too little faith.
So again, the Bible story here is a vivid call for Christ-followers to get out of our comfort zones and live boldly by faith.
But for us as investors, boldness isn't always the best approach.
So why are we then, as managers of God's resources, usually better off staying in the boat as it relates to our investing?
There are several reasons. One is stewardship. You know, managing God's wealth with his priorities and his purposes in mind — that's an assignment that's given to every Christ-follower. So this story begins with Jesus, giving his disciples an assignment: Get into the boat and go ahead of me to the other side. And just like that, we too have wealth-related marching orders to be good stewards of the Lord's money on our journey that we're taking in this life.
So the main point we're trying to make in this article is you need an "investing boat" that will carry you safely across these occasionally turbulent economic waters. And in stewardship terms, your boat is a biblically sound, personalized money management strategy. You need a plan that will guide your spending, saving, investing, your generosity. And this plan needs to be designed to ensure that you arrive safe at the end of your financial journey. You know, it'd be kind of foolish, Rob, to think that a person can survive the wind and turbulence for very long without being in a well-built boat.
(laugh) That's exactly right. But then again, it's not enough just to have a boat or a plan, is it?
No, it isn't. Unlike Peter investors need to stay in their boat. As we say in the article, "it's generally not safe to think outside the boat." But unfortunately, a lot of Christians don't even take the time to build their boat. Or if they have one — if they have a plan like we're talking about — they don't always stick with it. They don't stay in the boat.
So again, what we're talking about here is a plan. You've gotta have one and then you've gotta stick with it, because the temptation is that when these economic storms come — the market maybe is having a bear market, like we've been having this year — the temptation is to abandon that plan and jump out of the boat. You know, it's great to have a boat, but you gotta stay in it.
And then along with that, we need to expect that there's going to be wind at times. You know, in this story in Matthew 14, the disciples weren't rookies — they were fishermen. They'd been on the lake before and they knew that heavy winds and storms were possible.
And in the same way, we need to realize there are going to be challenges on our financial journey. These challenges may look different for different people. You know, it could be unemployment, unexpected expenses, health setbacks, a bad economy from time to time, periodic bear markets that hit the value of our investments. But the point is we need to anticipate and plan for those possibilities. They shouldn't really catch us by surprise.
And then the last point, Rob, that I'd make on this is that — while we're having a little fun with the word play here in our article to make a point — the underlying message that we're trying to convey is actually the same as Matthew 14. And that is, ultimately we need to ignore the wind and focus on Christ. You know, the wind can cause us to grow fearful and sometimes react inappropriately. But that's where we are saying to stay in your boat and trust the One who said, "Never will I leave you. Never will I forsake you."
Hmm. That's great advice. Mark, any other takeaways from Matthew 14 that might apply to our investment life?
Yeah. One that I don't think people really think about very much is everything is risky. Now the risks may be different and some things are definitely riskier than others, but navigating these risks is essentially what selecting an appropriate portfolio mix is all about. When you own more stocks that gives you greater upside potential, but also more risk of loss.
And on the flip side of that, when you own more bonds and CDs that offers you more safety, but then you've got the risk of losing purchasing power and the face of the kind of inflation that we've been seeing lately.
So the challenge is always to balance the reward that you need against the risk that you're willing to accept. And that's really a primary focus of what SMI does for our members or what any advisor is trying to do for their clients.
I'd say, you know, one other takeaway from Matthew 14 is that the decision to grow always involves a choice between risk and comfort. So even the best strategies are gonna have setbacks at times. And that's why SMI uses an investing temperament quiz to help members identify an appropriate risk level for them before they get into the middle of a market storm.
And if someone is just thinking about cashing out —and we're certainly hearing from those folks — they haven't done it yet, Mark, what is your counsel to them?
Yeah, absent some kind of a tested mechanical process that's gonna help you remove your emotions from this decision, trying to move in and out of the market is a really hard thing to do for an individual investor — and most people, quite frankly, just do a terrible job with that. After every bear market we hear from people who got scared, they sold out, and then they stayed in cash for years after the bear market ended, which means that they missed the inevitable big rebound on the other side of the bear market. And that's a very real risk if you're trying to do this on your own.
So, big caution flag for people who are thinking, "Maybe I just need to sell and go to cash and I'll figure it out later." You know, with the market already down pretty significantly this year, I'd tell an individual that's nervous and thinking about that, that they either need to ride it out using a stock/bond allocation that they can stick with, or maybe they need to look to a service like SMI's that can at least give them more objective data to base those buy and sell decisions on.
Yeah, that's really helpful. You can learn more at soundmindinvesting.org.
Mark, the market is obviously going to anticipate the economic data well before it happens, which means that even if we are in a recession, the market will likely recover well before the economy recovers — which is one of the challenges why so many people miss the market moving back up if they go to cash, right?
Yeah, that's exactly right. Almost always the market will recover before the recession is over. And that is what makes it honestly a lot harder at this point, from my perspective, than it was earlier in the year to say that raising cash is a good move right now. Now, that's different from if you're already in cash, reinvesting. I think that might call for a little more patience.
But that is why I would be more hesitant than I was, say, a few months ago to suggest someone selling now because we are that much closer to the recession and potentially the end of the bear market.
Yeah. Very good sound advice, as usual. Mark, thanks for stopping by, my friend.
Always my pleasure, Rob
Mark Biller is executive editor at Sound Mind Investing. You can read about today's topic in their article If You Want to Arrive Safely, You've Got to Stay in the Boat — at soundmindinvesting.org.
We're going to pause for a brief break, but we'll be back with more MoneyWise on American Family Radio.