by Ron Bare
I have had the privilege of working with hundreds of people over the years building financial and investment plans based on their goals, values, and the purpose of the wealth given to them. Looking back over 20 years of doing this, a common theme has risen to the top relating to investment decisions and long term success. It relates to how closely we make investment decisions based on a financial plan compared to making investment decisions outside of a well thought out plan.
When we make investment decisions based on a financial plan that aligns with our goals and values, a few things occur. First, we know how much is enough – a critical element in helping us live a life of contentment. Without knowing what enough to meet our goals is, we are left with accumulation without purpose. A second result of knowing our plans and goals prior to making investment decisions is that we can more easily determine what types of investments (from the endless options) are in our best interests. Most investment decisions should be determined by our values and goals, purpose for the money, timeframe, income needs, and liquidity needs. It is also important to have a proper understanding of risk and return (most of us do not understand the definition of risk – perhaps another blog for the future). However, many investment decisions are based on something outside of these items….
When we make investment decisions outside of a financial plan that aligns with our values, purpose, and goals, we are extremely susceptible to our emotions. A previous blog (March 2017) written about fear and greed can certainly be applicable here. You don’t need to look far to find reasons not to invest. Just pick up the paper or go to your favorite news website and there will be a multitude of reasons not to invest. The ironic item is whether the market is doing very well (such as a time as this) or is doing extremely poorly (remember 2008), the reasons not to invest are always there. My theory is that fear sells more than optimism and journalism wants us to read their press. Therefore, they print fear.
On the other side of emotions is greed. Jesus said in Luke 15 “Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions” (NIV) Notice the emphasis on “Watch Out!“, Jesus clearly knows we need to be on the lookout against greed and He also makes the point that life does not consist of accumulating possessions. When we have no plan and have not defined “enough”, we tend to want to accumulate more and more. This then becomes our focus. If our focus becomes our possessions, then our investment decisions lead to speculation and an over concentration on the news, markets, and timing – which all lead back to fear. The danger of greed is that wealth begins to control our thoughts, feelings, and emotions, thereby consuming us.
True abundant life should be focused on our relationship with God, our family, and how to make the world a better place. By developing a well thought out financial plan that aligns wealth with our God-given purpose, we can make better investment decisions that honor God, impact our family and make the world a better place.