Overcoming Fear in Investing
How Faith, Patience, and Strategy Can Guide Your Investment Success
The market is often filled with noise, especially during times of uncertainty. The media may try to convince you with fearful words like “recession” and “worst market day since…” that it’s the end of the investment world. While the current market may seem unsettling, it's important to understand what the market truly is, how it affects our portfolios, and why staying committed to a long-term investing strategy is key to achieving financial success.
The Power of Long-Term Investing: Why Patience and Consistency Are Keys to Success
Investing is a long-term decision. Building wealth through investing isn’t about chasing quick wins or seeking fast returns; it's about exercising patience and allowing your investments to grow over time. While short-term market fluctuations can be volatile, history shows that the market has generally trended upward over the decades. Consistently investing early in a well-diversified portfolio tends to yield strong returns over time.
When faced with uncertainty, many people begin selling off their investments out of fear, also referred to as emotional trading, which can negatively impact your long-term success. It’s easy to get distracted by short-term market dips, but history proves that long-term investors who remain disciplined and stay invested are the ones who typically benefit the most.
Historical Market Trends: How the Market Has Rebounded and What It Means for You
Throughout history, we've seen market downturns time and time again. But each time, the market has eventually recovered. Here are a few examples:
The Great Depression (1929): The market lost nearly 90% of its value, but it eventually rebounded.
The Dot-Com Bust (2000): After a significant downturn, the market fully recovered by 2007.
The 2008 Financial Crisis: Despite massive losses, the market fully recovered by 2013.
The 2020 Pandemic Crash: The market dropped dramatically, but it quickly rebounded.
Even after massive crashes, the overall trend has been upward. When we zoom out to look at the market over decades, the resilience is clear. While downturns are inevitable, recoveries have been as well. Research has shown those who hold onto their investments through difficult times often end up better off in the long run.
Navigating Short-Term Volatility: How to Stay Focused on Your Long-Term Vision
Right now, the market may seem bad or scary, but this is just a part of the natural economic and business cycle. Downturns are temporary, and long-term investing isn’t as affected by short-term swings as the media often makes it seem.
During times of uncertainty, it's essential to keep your focus on your long-term goals. Panic selling during a downturn rarely results in the best outcome. Remember: "Time in the market beats timing the market." Long-term investing isn’t about trying to predict short-term movements—something nearly impossible to do successfully. It’s about staying invested through both good and bad times.
Investing isn’t about focusing on short-term gains or trying to “get rich quick”—a risky endeavor that often leads to losses.
In Ecclesiastes 3, Solomon writes about the cyclical nature of life and the natural rhythm we experience. He writes, "There is a time for everything, and a season for every activity under the heavens." Ecclesiastes 3:1. This passage reminds us that there are seasons of growth and seasons of difficulty. Investing for the long-term means recognizing that both good and bad times are part of a cycle.
Overcoming Fear and Doubt: Biblical Wisdom for a Confident Future
Fear is a powerful emotion that can lead to poor investment decisions. It’s natural to feel fear during a market downturn, but history teaches us that staying invested and being patient tends to pay off. Long-term investors need to trust in the process, just as we trust in God’s timing. When we remain calm, even during tough times, the market tends to recover, and patience often leads to rewards.
Combating fear begins with having faith with the actions we take. It is also a matter of perspective. Wealth-building is about patience and consistency. Like a farmer who plants seeds and nurtures them over time, your investments require care and a long-term commitment. In our last blog, we discussed how Joseph stored grain during the years of abundance to prepare for famine. Similarly, by staying invested and not panicking during market downturns, we can prepare ourselves for long-term financial success.
In the book of Joshua, Joshua is called to replace Moses and lead the Israelites. The problem was, they still needed to win a battle against some strong people who occupied the land. In Joshua 1, God encourages and affirms Joshua saying “Be strong and courageous” multiple times, along with some guidelines to keep in mind as he takes leadership over the people.
When we face moments of fear and doubt – whether market related or otherwise- it’s important to remember that God goes before us and is in this with us. We do not need to be afraid because God is with us.
The Importance of Diversification: Building a Resilient Portfolio
Even when markets are shaky, diversification can help reduce risk and increase the chance of a positive outcome in the long run. When you invest in a well-diversified portfolio, you're spreading out your risk, which helps minimize potential losses during downturns.
As we’ve discussed in previous blogs, diversifying investments across various sectors, asset classes, and regions is key to avoiding putting all your eggs in one basket. Some holdings are counter-cyclical, meaning that when the broader market is down, these investments may hold steady or even rise.
Ecclesiastes 11:2 advises: "Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land." This speaks to spreading risk and diversifying to protect yourself against uncertainty. Diversification balances your portfolio to capture gains and reduce potential losses.
Practical Steps for the Unsettled Market Environment: Embracing Faith, Patience and Strategy
To navigate market volatility effectively, it’s crucial to stay focused on your long-term goals:
Avoid Panic: When others are panicking, stay calm and focused. Keep your mind on your retirement, financial freedom, and family’s future—rather than short-term market fluctuations. Having the right perspective can minimize fears or doubts.
Don’t Check Your Portfolio Too Often: Constantly checking your account balance during volatile times can cause unnecessary anxiety. Awareness is important, but avoid daily market news and emotional decisions. If you have a professional investing on your behalf, trust them to have conversations with you about what’s going on and ask them how they are diversifying your portfolio.
Invest Anyway: If your financial plan includes regular investments, don’t let fear prevent you from following through. Inaction is just as dangerous as the potential for short-term losses. The market could turn around at any moment. Remember that keeping your investments diversified can help mitigate the volatility.
Trust the Process: Trust in God’s plan and the investment strategy we’ve discussed. The models and forecasts we use account for market fluctuations and downturns. Pulling out or abandoning your plan due to fear could undermine all the work you've done.
Conclusion: Staying Confident in the Face of Market Challenges
Investing, like life, is a journey with both highs and lows. While there may be times of fear and doubt, history shows that the market can recover. Trust in your strategy, stay consistent, and most importantly, have faith that in the end, the journey of long-term investing will lead to rewards.
Biblical Verses for Reflection
"There is a time for everything, and a season for every activity under the heavens." - Ecclesiastes 3:1
"Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land." - Ecclesiastes 11:2
“Have I not commanded you? Be strong and courageous. Do not be afraid; do not be discouraged, for the Lord your God will be with you wherever you go.” -Joshua 1:9
“Consider it pure joy, my brothers and sisters, whenever you face trials of many kinds, because you know that the testing of your faith produces perseverance. Let perseverance finish its work so that you may be mature and complete, not lacking anything.” -James 1:2-4