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InvestingThe Truth about Investing
By Steve Diggs

Okay.   I’ll admit it.  I’ve been more than a little bit nervous about my investments over the last year.  It seems as though we’ve all stepped through the looking glass and what used to be up is now down.  Many of us have stared in the headlights as our 401(k)’s have begun to resemble our paychecks.  And, yes, the near-term future still appears fraught with all sorts of hazards and the possibly of more Bernie Madoff’s.  So, the big question: What do we do now?

Since I’m not one of those Bob Blow-dry TV pundits with a glib answer to every question, let me begin with the truth.  I don’t know what’s going to happen.  In fact, no mortal does.  The best we can do is make educated guesses based on past market performances. But, with your permission, allow me to share a few thoughts. 

  1. As I just said, no one knows what the future holds.  Let that sink in for a moment because it flies in the face of much of what we’re told by some high-powered money managers and advisors.  Many of these people claim to be able to “maximize our returns by selecting the right stocks,” or “beat the market averages with our insights.”  Sure, telling people to buy low and sell high sounds great—but what do you do if that doesn’t work?  Studies have shown that when some of these big-brag fund managers are tracked over extended periods (say, 20 years or more), over 90 percent of them frequently don’t even meet market averages.  And, the trouble is, you don’t know 20 years ahead what 5 or 10 percent of them will do it!
  2. Don’t bet the farm on a few hot tips. Although it runs counterintuitive to much of the noise and hype, historically, many successful investors have staked their careers on this basic principle.  Instead, they diversify over a wide range of investments (possibly with some in various domestic stock mutual funds, foreign funds, bonds, and cash-related investments.)  Personally, I have my own investment dollars diversified in more than 15,000 stocks in over twenty countries.  Does this guarantee the highest possible return?  No, but historically and when done correctly, proper diversification has been a successful way to grow value over a long periods of time.  Part of the reason for this is that different investments tend to perform differently in the same period of time.  For instance, when one investment is down others are likely to be up—or, at least not as far down.
  3. Avoid risky investments to make up for recent losses.  Too often I see people (often nearing retirement age) throw caution to the wind and jump into high-risk commodity trading or buying and selling shorts to recoup money that’s already gone.  Unless you’re a true pro, the risk is high that you’ll leave this party hurting even worse.
  4. Pay attention to the costs and fees.  Don’t let someone lean back in his chair and say, “Hey, what’s the big deal?  It’s just another half a percent.”  That half percent can cost you thousands over the years.  Here’s the plan: If it’s no big deal to him—we’re going to let him pay it!  Watch the fees and ferret out hidden expenses in all of your investments. High costs can decimate long-term returns.
  5. Don’t push the panic button without thinking.  One sure way to fail at investing is to buy high and sell low.  Too many people wait until markets are sailing along at record highs—and then they jump in.  Then, when the markets go down, they get spooked and sell.  Recently, more people at my speaking engagements have come up and announced that, “When I realized I’d lost half my money, I decided to sell.”  Admittedly, this may make sense in some cases (i.e. if you’re in retirement).  But as a strategy, it can be very costly.

The fact is, I don’t know what’s going to happen.  No one does.  But I do have a general
belief that the markets will repair themselves eventually.  Each of us must do what we feel is best.  But as for me and my household, I plan to stay the course. 

But on a deeper level, as Christians we can put our trust in God to provide.  His principles always work.  Proverbs 13:11 echoes through the ages:  “Dishonest money dwindles away, but he who gathers money little by little makes it grow.”

Steve Diggs presents the Re-Tooled & Re-Fueled and No Debt No Sweat! Christian Money Management Seminars at churches and other venues nationwide. Visit Steve on the Web at www.retooledandrefueled.com or www.nodebtnosweat.com or call 615-300-8263.  The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville.  For 25 years he was President of the Franklin Group, Inc.  Steve and Bonnie have four grown children whom they have home schooled.  The family lives in Brentwood, TN 

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