Rob West: The field of behavioral economics has revealed something the Bible has been telling us for thousands of years. I am Rob West. What is that, you say? It's that we're not nearly as rational as we think we are, especially when money is involved. Mark Biller joins us today to show how biblical wisdom can help overcome some of the behavioral tendencies that work against us as investors. And then it's on to your calls at 800-525-7000. That's 800-525-7000. This is Faith and Finance on American Family Radio, biblical wisdom for your financial decisions.
Well, it's always a treat when Mark Biller stops by. He's executive editor at Sound Mind Investing, he's the senior portfolio manager at SMI, a valued underwriter of this program, and he's going to be sticking around today for the entire broadcast. So, this is a great opportunity. If you have questions about the market, your portfolio, perhaps some of the decision-making behind the, uh, investment decisions you've made, or you just want to know where this economy is headed and how that plays into your plans, uh, Mark is here today. We will prioritize those questions on topic, so investing-related questions, 800-525-7000. That's 800-525-7000. Mark, great to have you back with us.
Mark Biller: Thanks for having me back, Rob.
Rob West: Mark, you wrote in the latest SMI newsletter that the study of finance and economics has undergone a pretty radical shift in recent decades. So let's start there. What's changed?
Mark Biller: Yeah, well, most of the dominant theory in economics and finance has historically been based on the idea that individuals are these perfectly rational actors. In other words, we supposedly always make rational financial decisions that are based on all the information and knowledge that's available and that always serve our economic self-interest.
But newer economic research has increasingly shown that our decisions are actually often driven by our emotions, and not surprisingly, that often leads to counterproductive results. So spearheading this shift in thought in the field has been this new emerging field of behavioral economics. And the champions of this new field have gone from being ridiculed and scorned initially, to more recently winning Nobel prizes for their work.
Rob West: Wow, yeah. So, as you said, the idea of behavioral economics as a field may be relatively new, but you point out in the article that what it tells us about human nature isn't new at all. So, as Christ followers, why should these findings sound familiar?
Mark Biller: Yeah, that's exactly right, Rob. You know, while the conclusions that have been reached by these behavioral economists in recent decades have been really surprising to the economics field, they really haven't been that surprising to anybody who's familiar with scripture. And that's because a number of these key findings are actually based on specific human weaknesses that the Bible speaks really clearly about.
Rob West: Yeah, exactly right. And I think that's a big idea here. Let's look at those, Mark. Uh, the first is that wisdom is flawed. What does scripture tell us about that?
Mark Biller: Yeah, our wisdom is flawed, and 1 Corinthians 3 tells us, "Do not deceive yourselves. If any of you think you're wise by the standards of this age, you should become fools so that you may become wise, for the wisdom of this world is foolishness in God's sight." So that kind of gets to this idea that our wisdom is flawed.
And then you compound that by the fact that our motivations are impure. Jeremiah 17 tells us the heart is deceitful above all things and beyond cure, who can understand it?
Rob West: Yeah, exactly. And I mean that's a a big idea and we see that scripture clearly uncovers all of these ideas. It also warns about our emotions and our limited ability to see what's ahead, right?
Mark Biller: Yeah, absolutely. Our emotions regularly can overpower us, and we see that in markets whenever the stock market, especially, is at a top or at a bottom. People react very emotionally. No surprise, Paul told us back in Romans 7, "For I know that good itself does not dwell in me, that is in my sinful nature, for I have the desire to do what's good, but I cannot carry it out." So even when we want to do the right thing, our emotions make it hard for us to do that.
And then to the point that our vision is limited, James 4 tells us, "Now listen, you who say today or tomorrow we'll go to this or that city, spend a year there, carry on business and make money. Why, you do not even know what will happen tomorrow. What is your life? You're a mist that appears for a little while and then vanishes."
Rob West: Yeah, that puts it all in perspective. Well, we're going to continue to unpack this. What's driving the decisions you're making with your investments? Also your phone calls, 800-525-7000. Mark Biller here, stick around.
SEGMENT 2
Rob West: We're talking about your decision-making specifically around investing and managing emotions and risk that comes with it, and as Mark Biller has shared with us today, biblical wisdom is the best defense against emotional investing. Mark is here today, he's our go-to guy on the markets and your portfolio. He's taking your questions today, so if you have something in your wrestling with in your life related to your investments, your portfolio, perhaps the best strategy for you moving forward, maybe something related to the economy, we are prioritizing those investing-related questions today. Mark is here throughout the broadcast. Now is the time to call. We do have some lines open. We'll get to those calls here in just a moment. So, 800-525-7000 is the number to call. That's 800-525-7000. If you'd like to check out the article we're talking about today related to biblical principles of investing and even Sound Mind Investing's approach, whether through the newsletter or the private client group, just go to soundmindinvesting.org to learn more.
Now Mark, before the break, we talked about these ideas that our wisdom is flawed, we talked about our emotions and how they can affect our decision-making, also our limited ability to see what's ahead. So if we know these weaknesses are a part of human nature, how should that change the way we approach investing?
Mark Biller: Yeah, I think there are a couple pieces to that, Rob. You know, SMI has long taught that individuals can become better investors first by understanding what these counterproductive behavioral tendencies are, and then following that up by learning how we can moderate them, how we can put boundaries in place that will help us to follow the time-tested investing practices and rules that are rooted in scriptural principles.
So first we need to understand ourselves, then we need to put in these protective barriers or boundaries to kind of keep us on the right track. And so we try to do that in our strategies. It's also why SMI has, has always tried to weave these biblical precepts into our investment counsel.
And there are really three particular ways that we address some of these common behavioral issues that work against people's long-term investment success.
Rob West: Hmm, yeah. Let's dive into those and in just a moment we'll begin taking your phone calls. So now is the time to call 800-525-7000. We have a few lines open with your questions for Mark Biller today. Mark, let's start with selling. You recommend strict, non-emotional selling guidelines. So what behavioral problems are those designed to protect us from?
Mark Biller: Yeah, well, selling guidelines, Rob, are a key defense against what the behavioral economists call the endowment effect.
And that is simply the tendency we all have to value something more highly than we should just because we own it. So, having a strong selling discipline is going to help us protect against that. It's also going to help protect against the idea of sunk costs, which refers to the difficulty that humans have in parting with something that they've invested in.
You know, without these types of strong and importantly mechanical selling disciplines, we'd be just as prone as anybody else to falling in love with certain investments after a run of success, or on the other hand, wanting to hold on a little longer hoping losing positions get back to break-even.
And we don't have to go back very far to think of some really clear examples of this, Rob, right? About a year ago, we were doing programs together about gold, which was just ripping higher, and lots and lots of people wanting to pile into gold after it had gone up so much.
We were saying, oh, be careful. We're getting this kind of parabolic rise. Then you go back about six months ago and it was the same thing with the semiconductor and AI stocks, and we were doing a program then about the the parabolic bubble-like tendency of the market right then.
So having, you know, these built-in mechanical disciplines to not race in and not sell out in fear when the market's plummeting, those are really, really important baseline guidelines for investors.
Rob West: Yeah, those are really helpful. Let's try to sneak in a few phone calls here along the way. Still a lot more to talk about related to this topic and the article at soundmindinvesting.org.
Let's go to Indiana. Allen, how can we help you, sir?
Allen: Just good morning. Thank you for taking my call.
Rob West: Sure.
Allen: I have, I have an equity and fixed income portfolio, approximately 70% equities and 30% in fixed income.
Allen: Most of those fixed income instruments are ETF bonds. My question is, in light of interest rates likely going up or the possibility of them going up, what would be the way forward that, that Mark or you would be able to help me with in terms of the existing bond ETFs I have? I noticed they've gone down about 2% or so in the last 30 days. So hopefully that helps.
Rob West: Yeah, very good. What do you have a sense of what bond ETFs you have in terms of duration?
Allen: Yes, a great question. I don't know the portfolio average for the, the entire account, but, uh, I think most of them are intermediate, perhaps some as long as 10 years.
Rob West: Okay. Yeah, very good. Mark, your thoughts?
Mark Biller: Yeah, good, good stuff, Allen. So, first I'll lead off on a little bit of a hopeful note for you, and that is, you know, it's no surprise people who've listened to me on these programs over the last few years are probably aware that I have not been a big fan of bonds.
It's, it's been a real challenge, uh, really since COVID when interest rates started to rise, uh, for those who aren't familiar with how bonds, uh, and bond ETFs work, rising interest rates mean falling bond prices.
So in COVID, interest rates got down as they bottomed out with the 10-year Treasury yield at about 1/2 of 1%. That 10-year Treasury yield then over the last five or six years has gone up to over 5%. So as those interest rates have come up dramatically, bond prices have sold off and it's been a really tough ride for bond investors.
The hopeful part of that, Allen, is that with interest rates where they are today, we actually have good reason to expect that bond performance will be quite a bit better than it has been over this period when those rates were rising so much.
To go from 1/2 percent to 5%, that's an enormous rise. And, you know, even if rates were to go from say 5% to 6%, that's a much smaller incremental move.
Plus, with bonds, you're always earning the interest rate that is attached to those bonds, which is over 5% today.
So that's going to help buffer any kind of further losses from rising interest rates.
Some listeners are probably going, holy cow, Mark actually sounds like he's positive on bonds for the first time I ever remember.
And that's fair, you know, it, it's an ironic thing that as this asset class has done so poorly recently, it actually, ironically, becomes much more attractive.
It's kind of like with the stock market, when it falls and falls and falls in a bear market, at a certain point you look at how much it's down and you say, wow, that actually's starting to look attractive on the buy side.
So Allen, I guess the first point is just don't necessarily despair and go too far off of what you think really is the appropriate long-term stock bond allocation for your portfolio.
And maybe we'll touch on a couple other points after the break.
Rob West: Yeah, that sounds great. Allen, we'll let you go. You can certainly listen in. We'll get to the rest of Mark's thoughts after this break.
More questions ahead. Mark Biller here today. We're talking about investment decision-making on Faith and Finance. Stick around.
SEGMENT 3
Rob West: We're talking about better decision-making for your investments today. The field of behavioral economics has revealed some things that we've known for thousands of years that come right from God's word, and Mark Biller has a great article on that topic at soundmindinvesting.org. You can check it out when you visit soundmindinvesting.org. While you're there, if you're a do-it-yourself investor, the SMI newsletter has been a trusted resource for decades for our listeners. Check it out while you're there. Also, if you want to delegate that, the private client group is available. Mark leads that team as senior portfolio manager. All of that and more at soundmindinvesting.org. We're taking your calls as well today at 800-525-7000. We'll get to as many calls as we can and we will prioritize those questions related to investments. So, if you have a question about your strategy, your portfolio, something for Mark Biller today, call right now, 800-525-7000. Mark, before we head to another call before the break, we were talking about bonds, and I'd love for you to finish for our caller.
Mark Biller: Yeah, it's worth taking a little extra time on, Rob, because understand it or not, right now, interest rates are at the heart of everything going on across markets. We've had a really rapid rise in rates since about the end of August. The 10-year Treasury yield was about 4.6% then. It then shot up to 5.3%. That's a very fast move in a very short amount of time. It's backed off a little bit since, but those ripple effects have definitely been felt across the stock market, especially smaller-cap stocks that are more interest rate dependent. So it's really worth understanding what's going on with these interest rates and what we can do as investors to defend against those. So, like we were saying before the break, you know, ironically, they're a little bit more attractive now. So we don't necessarily want to throw all the bonds out at this point, but there are some really easy steps we can take. One of them, you hinted at with Allen when he was on the call there, and that is look at the duration of the bonds that you hold. Right now, and really this is true most of the time, but especially right now, that intermediate-term bond market, which is roughly 7- to 10-year bonds, that tends to be the sweet spot for the bond market. I say that because, historically, longer-term bonds, longer than 10 years, you get a lot more risk with only a little bit more return, so it's not a great tradeoff. And on the real short-term end, you tend to not get nearly as much return as intermediate bonds tend to provide. So that's a real easy thing that anybody can do who owns bonds in their portfolio: check the duration, look for those good intermediate-term bond funds, that's 7 to 10 years, that's usually a good sweet spot. Another really easy thing to do is our SMI bond upgrading strategy recommends four funds that have done real well through this period, have outperformed the US bond index over that time. So that's a real simple way, too, to try to hone in on some better options. And then the last one, Rob, that I would recommend if people are interested in digging a little further, is there are a type of bond ETF, they're fixed-duration bond ETFs. iShares iBonds is one that you can look up as a starting point. There are other brands as well. But what these do is they target a specific year that the bonds in that ETF expire in that certain year. So you'd be looking for something like iShares iBonds 2029 or 2030. And what those do is it's a lot more like owning a portfolio of actual individual bonds. It insulates you from rising rates and the interest rate risk that we've been talking about, as rates go up the bond prices go down. These do a lot less of that. So it's more like owning your own individual bond, and so that can be an appealing way to kind of fight off some of this rising interest rate risk as well.
Rob West: Yeah, that's all really helpful. I know this is a question that a lot of folks are wrestling with just given the decline that they've seen in this portion of their portfolio with bonds over the years. Taking your questions today, 800-525-7000. Investing-related questions are the priority with Mark Biller, but we'll try to sneak in a few others as well.
We'll be headed to Ohio in a moment, John, thanks for your patience. We'll go to Alabama next though, Gary, go ahead, sir.
Gary: Good morning, gentlemen. Thanks for taking the call. So, you were talking about wisdom in financial decisions, and I'll try to give you a little backstory. I'm retired military, so I've got a pension, I got good things going there, and since I retired I've gotten into income properties. And I've bought storage buildings, and I've been really lucky and favored by the Lord in my dealings, selling. I've doubled my money here, I've tripled my money there on dealing the property, selling them. But then, as I got bigger, as I got more stuff, more doors with regard to storage, I ended up buying a property and I didn't do my proper due diligence on this property. And I've got, I'm like slaved to it now. I've got more income than I've ever had, and because it's passive income, that's great. But I've assumed this debt load and, you know, I just guess the moral of the story is make sure you do your due diligence, because I'm kind of teetering with this debt load that's over, over about seemingly out of control. And I bought some toys counting on a sale of a certain property, and it hasn't sold. It's been on the market for a year, and actually the realtor who was listing it kicked me to the curb because, I don't know, I guess it's too small of a property for him to want to deal with, and I don't know, there's not a demand, it's a rural location. So there's all these variables, and I could go on, and I know the solution isn't handled in a two-minute phone call with you guys, but certainly maybe y'all have some counsel or can double tap, do your due diligence when it comes to buying properties, you know?
Rob West: Yeah. Yeah, well I appreciate your transparency and vulnerability, Gary, and I know this is going to serve as a reminder and encouragement to our listeners today. I would love to share some thoughts, and we'll get Mark's as well. We're up against a break here; we'll do that right after the break and head to more questions as well. This is Faith and Finance, stick around.
SEGMENT 4
Rob West: Great to have you with us today on Faith and Finance here on American Family Radio. I'm Rob West. Have you thought about the emotions behind your investment decisions? How is that impacting you? Well, behavioral finance has a lot to say about it, but it's not new. It comes from God's word. We understand from the timeless principles in scripture how our wiring and our emotions can affect every decision we make, certainly those decisions related to money and investments. Mark Biller is here today. He's written an insightful article on this topic, biblical wisdom and how that intersects and is a defense against emotional investing. You can check it out at soundmindinvesting.org.
Before the break, we were talking to Gary. Gary is a former military. He's got a pension from his service. He also started investing in real estate, did very well, has had a double and a triple along the way, but then got into a property that, to his point, he didn't do the proper due diligence, and he's now paying for that. And other than just serving as a reminder to each of us on the importance of not getting ahead of ourselves, especially when we've had some early wins, just wondering if there's any advice for him.
And Mark, I'll let you weigh in in a second. I'll just say first, Gary, thank you for your service to our nation. Obviously, you've worked hard, you've made some wise investments, you've built substantial assets. One, I'll say bad real estate decision doesn't erase all of that. But I do think in terms of the practical steps here, number one would be let's, you know, really be on our guard against taking on any additional debt. I'm not hearing you're interested in that, but I just want to put that out there. Let's not try to invest your way out of this situation by purchasing another property or taking on another big risk. I think it's always important, and I suspect you've done this, but get a complete picture of your finances. You know, list every property, its realistic market value, the outstanding mortgage, the interest rate, the payment, the rental income, and operating expenses. And then identify which properties are helping or hurting, and then we could look at, you know, considering selling some assets to eliminate the debt. You mentioned the doubling and the tripling, and you know, that's wonderful. Maybe we can turn some of those gains into the financial security that you're looking for.
And then it sounds like, you know, replacing that realtor—maybe it's not easy because of the rural nature of this property, but getting somebody, you know, fresh in there who's willing to really work with you and take this seriously, and try to get this aggressively marketed in such a way that you could unload it and wind this down, especially if you're not looking to sell some things. So I would say, you know, those are probably the next steps here as you move forward. Mark, anything else you want to add?
Mark Biller: Yeah, you know, as Gary was describing this, it really just made me think of what we mentioned earlier in the program: that idea of sunk costs, that sometimes because we've put so much effort, blood, sweat, and tears into into something like this property, it can be really hard to see clearly, and then really hard to get rid of it. As you were just saying, Rob, you know, sometimes you need to maybe even take a deal that doesn't seem like a great deal, just to kind of get rid of of the asset.
You know, the key to that sunk costs idea—and this is true with all of us, even in our just normal stock bond portfolios—is asking ourselves: "If I didn't already own this, would I buy it today at this price?" You know, and so I think there's a lesson maybe in there for Gary where if you were to look at that objectively with outside eyes to see, okay, maybe this isn't a great deal, but if I can get out of it, rinse my hands of it, maybe that is, you know, my way forward.
You know, I would also say, Rob, you know, first and foremost, in a situation like this, always, you know, asking God for wisdom. He tells us He gives it generously to us without finding fault, and then just asking Him to show what the path forward should be. That's that's certainly, you know, step number one.
Rob West: Yeah, very good. Gary, is that helpful?
Gary: Tremendously. Thank you. Thanks, Rob.
Rob West: All right. Lord bless you, my friend. Thanks for calling today, and call anytime if we can serve you.
Let's see. Let me head to Ohio. John, you've been waiting patiently there. How can we help, sir?
John: Yeah, I have kind of like a two-part question. The first one being I got a refinance on the table looking at me. I'm currently got a 3.6 on my mortgage right now, and they want to offer a 5.8 for 15 years. And of course, the tax and insurance is included in everything. And they want to do a cash out, 20k, and then I was only thinking of even possibly doing that just for the fact of it kind of alleviates a little bit of that—I hear you talking about nest egg and having something set back for the, you know, the difficulties you'll face, because you'll, you know, face difficulties eventually, something will break. And does it make sense to do something like that as far as refinancing for 5.8 just to get that comfort zone and pay off some debt and have a end date of when it's paid off, like for 15 years?
Rob West: Yeah. Typically not. I would be very hesitant, John, to give up a 3.6% mortgage that—we have some listeners going, "I would love to have a 3.6% mortgage right now!"—especially when you're replacing that at something 6% or higher, or even 5.8%. And I would also be hesitant to roll unsecured debt into your mortgage and secure it by your home. I realize, you know, if you're trading—if this is credit card debt, and you didn't say that, but if it is, 22% to 30% for roughly 6%, I can understand why on paper that makes some sense. But we're also, you know, taking something that's unsecured, we're making it collateralized by the home, and we're giving up that, you know, that really attractive rate, which over the next 15 years, I mean, my just quick math here is, I mean, that could be as much as $40,000 more in interest just by increasing that, you know, that rate, you know, depending on what that balance is, but that would be on a $200,000 mortgage.
So, you know, I would probably leave that alone. If you need to do some things that require or that really are improvements to the home, I'd use a home equity line of credit for that, and then just plan to try to pay it back as quickly as you can. If it's credit card debt, I'd use Christian Credit Counselors, and let's try to get that interest rate down, but let me leave the debt right where it is. And then really we need to make sure we've solved the issue that got you into that debt in the first place, which is, yeah, let's limit lifestyle, try to build up that emergency fund, and live within your means so we don't, you know, we don't run those balances even higher. But I would not be in favor of of rolling that into the house.
John: Okay. The second question I have is—this'll be real quick—I did a Parent PLUS loan for my daughter for going to college, and course she's graduated and in the search of a, you know, a lucrative job right now, and you know, kind of tough to find. But when the loans are coming up due here, probably within two months, and do you recommend consolidating? It's four different loans when she went to college for Parent PLUS, and it's four different loans. You recommend a consolidation or an IDR or, you know, something like that to make the payment, you know, a little bit more manageable in case that job doesn't arise?
Rob West: Yeah. Yeah, I wouldn't rush to consolidate that just because the payments are starting. I mean, it can be helpful, it doesn't lower the interest rate. Essentially what it does is just, you know, rolls it all into one payment, so it simplifies it a bit. You know, the new rate would be a weighted average of the existing rates, assuming we're talking about—well, it would be with the Parent PLUS, that's a federal loan program—and then they round up to the nearest 1/8 of a percent, so it doesn't lower the market interest rate. It preserves the, you know, income-based repayment options if you ever needed those down the road, but essentially the main idea with that loan consolidation is just that it it rolls it all into one payment so you don't have multiple payments. So there's really not a huge benefit there. I think the key is, you know, as soon as she's able, if it is her responsibility, get her paying toward it, and for you, just try to pay it off as quickly as you can. Thanks for your call. We'll be right back.
SEGMENT 5
Rob West: Thanks for joining us today on Faith and Finance here on American Family Radio. Mark Biller's here today. We've been talking about investment decision-making and how God's word is really our best defense against decisions that are driven by emotions, which can so often be the case when it comes to our investing. Uh, we're going to get back to some of these key points from the article Mark has written on this topic, which you can find at soundmindinvesting.org in just a moment. But first, let's head to Alabama. Jackie, how can we help you?
Jackie: Oh, yes. And and thanks so much for helping me. I love it that you're both there for for good advice because I know Rob, you always give us the right advice, but it's always good to hear from someone else, too. Sure. So, um, thanks thanks so much. So, we're 76 and a half, my husband and I, and God has blessed us uh through a lot of saving and not spending to have like $300,000, uh, you know, in various cash available instruments, whether CDs, iBonds, uh, you know, et cetera. And then we would have about $800,000 in other money. And then our house is valued probably at $600,000, and uh it's like do we even need bonds? I don't think I've ever even gotten my bonds back from 2022. I have them in like the Vanguard Total Bond Market, 5 to 7 years. I'm about 60/40 uh 40% bonds, 60% stock. No, 60% bonds, 40% stock. But I don't think we're going to need this money, you know. And it's like shouldn't I be for God's kingdom putting it maybe into VYM or Noble, you know, the IRA type of money, or maybe um Fidelity has uh something that's a five-star rated Morningstar, um that is very good. It's 15% international and then it balances out 50/50. Um and it's done very well. I mean, should I just let that money that's earned like 1% in the last 10 years, you know, just do that? You know, I don't feel like a good I don't feel like a a good steward of this money.
Mark Biller: Yeah. Well, you sound very astute in in all that you're thinking about and doing here, Jackie, so well done. Mark, uh, what are your thoughts?
Yeah, you know, those those are great questions, and a lot of people are asking that right now, Jackie, because bond returns have been poor, and also because stock returns have been so good. And that's the piece that we have to always kind of put a little flag on, um, because anytime the stock market has gone up a lot, as the stock market has the last three or four years since 2022, it becomes really easy to just extrapolate that in our minds and kind of forget that the stock market is the way more volatile market, and that it's really easy to, you know, drop 25% of your value in your stock investments in the course of a year or 18 months, something like that. And so we don't want to get too far over our skis, uh, with the stock side. Um, now I will say the one little caveat there that I heard Jackie is the "I don't even feel like I'm going to need this money," and in a situation like that, if you if you really are quite confident that this is money that maybe you're going to be leaving to heirs or something like that, that does allow you to extend your mental timeline with the money a little bit longer. And that's important because we always say you shouldn't be putting money into the stock market unless you have at least a 5-year time horizon and preferably a 10-year time horizon. And that's where people in retirement typically will say, well, my time horizon is quite a bit shorter; therefore, I need to be getting more conservative. So that would be the one reason, Jackie, that you might be able to say, maybe I don't go quite as conservative, uh, with my stock bond allocation with this additional money as I have with the rest of my portfolio, if I really do think that I'm investing this for my heirs, maybe a 10, 20, 30-year time horizon time horizon, that can make a little bit of sense. Um, so hopefully that that helps a little bit.
Rob West: Yeah, I think the other piece here is just the answering the question how much is enough, that we all have the opportunity to answer, and that can intersect both with our lifestyle spending, what we're spending monthly, as well as our lifetime accumulation. And once we identify the fact that we have more than we need, one of the other benefits is we get to start aggressively increasing our giving, which according to God's word, Jesus said is more blessed, which can translate into Macarios, happy-making. It is more happy-making to give than to receive. So the joy we get from being involved in God's activity is uh is just fabulous, and I think so often we think, well, we'll do our giving at death, when in fact we could do some significant giving right now, uh if the Lord has has blessed you with more than you need. But, uh Jackie, is all of that helpful to you?
Jackie: It is helpful, and, you know, one thing is we do not have long-term insurance, and so we never know how much is enough, do you know? It's like my husband, the doctor said he's going to live till 95 or 100. Um, probably not me because I've had some serious things, but um it's hard to know, um, you know, with brain things, different things, it's like when do we say, uh, "Okay, Lord, this is set aside for you," and then, you know, you know, we don't have children. And so it's like, okay, uh that's a hard one, I think, you know, to figure out to figure out what you should keep aside, um, you know, not for me, but for him, you know? Yes. So, anyway.
Rob West: Well, I agree, Jackie, and and I don't mean to say that it it is simple. I think it ultimately is an act of trust. It's a conversation between you and your husband and the Lord, and, you know, at the end of the day, we know it's not ours, it's all His. We trust Him as provider, and we need to find that, uh, that healthy tension between, you know, saving and being prudent and and having reserves for the unexpected, and at the same time saying, God, I trust you as my provider, and I want to give, I want to be a conduit of your provision into the things that are advancing the gospel and loving our neighbor and in the name of Jesus, and, you know, there's not a right or wrong answer there, and I can't tell you what that is. Um, we did produce recently a field guide, um, that a lot of our listeners and sort of our Kingdom advisors have found really helpful, and it's really dealing with this one single question: How much money is enough? And it provides both a biblical perspective, some exercises and worksheets that you can work through to figure out the answer, and then some case studies of people who have actually done it that might be encouraging to you. I would love to put one in the mail to you, Jackie, if you would find that helpful.
Jackie: You know, that's very kind of you. Um, I was researching like that it's average $345,000 per person, you know, one of us will probably need it, so I kind of go on that, you know. Sure. Sure. Yeah, you're talking about long-term care?.
Yes, so I kind of go go on that, you know, so um yeah, so probably probably um you know, I figured it out in my own mind in a way, you know, and and your resources your resources are important for for others too, you know. Very good.
Rob West: Well, I appreciate you raising the question. Hopefully, uh, Mark's insights have been helpful to you, and we uh certainly appreciate your call today. If we can help further along the way, don't hesitate to reach out.
Let's see. 800-525-7000 quickly to Alabama. We're going to finish with Jim. Go ahead.
Jim: Hey, good morning. Uh, I was just wanting to present a question. I thought that I could do a better job of self-managing. I had subscribed to Sound Mind Investing for quite some time. Uh, primarily the money's I've had, uh, invested were in a simple IRA through work and didn't have a extra for other investing, and there are a lot of, uh, Christian, uh, financial and investment, uh, ministries. Some, I think, screen for secular, uh, secular companies that might be involved in things that you wouldn't want to, uh, invest in, and some may not. Yes. Uh, and then also beware of, like, your Kingdom Advisors and other, uh, Christian financial advisors that you can, uh, I guess, uh, employ or whatever. And I was wanting to get some advice, maybe in the Montgomery or Birmingham area, of reputable, uh, Christian financial advisors that might could help versus trying to manage things, uh, on your own.
Rob West: Yeah. Very good. Well, I I think you're exactly right here, Jim, you know, an increasing number of Christians are really wanting to think about the companies that they're part owners of and make sure that they're not misaligned with their values, particularly where they might be investing in companies, uh, that are misaligned with their values in certain industries. You know, a lot of times that starts with anything that might be connected to abortion or an abortion drug or alcohol or tobacco or pornography, things like that, gambling. Um, and it can go beyond that based on the, you know, unique values, uh, of each investor. And the good news is there are investments that do that kind of screening on the negative basis where they screen out certain companies or industries, the positive basis where they're screening in companies leading to human flourishing, and then in other cases, they're even using the, uh, ownership position to engage with those companies, to have a thoughtful conversation with leadership. You know, you can go to findask.com, and when you choose the investing category, you'll be able to limit the church results to only those CKs that do what we call faith-based investing. And that would be the easiest way to get a list there in the Birmingham, Montgomery area. I'll also let you hold, and I'd be happy to, um, hand you off to somebody that, um, you know, I think could serve you in this particular way really effectively if you want to give your information to the team. We'll, we'll get, uh, get in touch with you after the show and, and help you get connected. But, Jim, I love the direction you're headed. I appreciate your call today, and stay on the line. We'll get your information. Mark, that's going to do it for us. Uh, final thoughts here before we wrap up.
Mark Biller: You know, Mark, it's always going to be unpredictable, and our human nature is going to tug at us all different directions, but if we can apply biblical wisdom to that, our investment decisions, it'll help keep us on the right track.
Rob West: That's well said. This article is available for you, folks. It's at soundmindinvesting.org. While you're there, as Jim said, you can, uh, check out the Sound Mind Investing newsletter. It's been helping Christians who were do-it-yourself investors for decades, uh, manage their portfolios. Also, the private client group is there that Mark leads. They'd be happy to serve you. soundmindinvesting.org. Mark, thanks for your time today.
Mark Biller: Always a pleasure, Rob.
Rob West: All right. Big thanks to Michael, Devin, Patty, Pat, everybody here at FaithFi that makes this possible. You want to support us, go to faithfi.com/give, and then come back and join us tomorrow.
Rob West: The field of behavioral economics has revealed something the Bible has been telling us for thousands of years. I am Rob West. What is that, you say? It's that we're not nearly as rational as we think we are, especially when money is involved. Mark Biller joins us today to show how biblical wisdom can help overcome some of the behavioral tendencies that work against us as investors. And then it's on to your calls at 800-525-7000. That's 800-525-7000. This is Faith and Finance on American Family Radio, biblical wisdom for your financial decisions.
Well, it's always a treat when Mark Biller stops by. He's executive editor at Sound Mind Investing, he's the senior portfolio manager at SMI, a valued underwriter of this program, and he's going to be sticking around today for the entire broadcast. So, this is a great opportunity. If you have questions about the market, your portfolio, perhaps some of the decision-making behind the, uh, investment decisions you've made, or you just want to know where this economy is headed and how that plays into your plans, uh, Mark is here today. We will prioritize those questions on topic, so investing-related questions, 800-525-7000. That's 800-525-7000. Mark, great to have you back with us.
Mark Biller: Thanks for having me back, Rob.
Rob West: Mark, you wrote in the latest SMI newsletter that the study of finance and economics has undergone a pretty radical shift in recent decades. So let's start there. What's changed?
Mark Biller: Yeah, well, most of the dominant theory in economics and finance has historically been based on the idea that individuals are these perfectly rational actors. In other words, we supposedly always make rational financial decisions that are based on all the information and knowledge that's available and that always serve our economic self-interest.
But newer economic research has increasingly shown that our decisions are actually often driven by our emotions, and not surprisingly, that often leads to counterproductive results. So spearheading this shift in thought in the field has been this new emerging field of behavioral economics. And the champions of this new field have gone from being ridiculed and scorned initially, to more recently winning Nobel prizes for their work.
Rob West: Wow, yeah. So, as you said, the idea of behavioral economics as a field may be relatively new, but you point out in the article that what it tells us about human nature isn't new at all. So, as Christ followers, why should these findings sound familiar?
Mark Biller: Yeah, that's exactly right, Rob. You know, while the conclusions that have been reached by these behavioral economists in recent decades have been really surprising to the economics field, they really haven't been that surprising to anybody who's familiar with scripture. And that's because a number of these key findings are actually based on specific human weaknesses that the Bible speaks really clearly about.
Rob West: Yeah, exactly right. And I think that's a big idea here. Let's look at those, Mark. Uh, the first is that wisdom is flawed. What does scripture tell us about that?
Mark Biller: Yeah, our wisdom is flawed, and 1 Corinthians 3 tells us, "Do not deceive yourselves. If any of you think you're wise by the standards of this age, you should become fools so that you may become wise, for the wisdom of this world is foolishness in God's sight." So that kind of gets to this idea that our wisdom is flawed.
And then you compound that by the fact that our motivations are impure. Jeremiah 17 tells us the heart is deceitful above all things and beyond cure, who can understand it?
Rob West: Yeah, exactly. And I mean that's a a big idea and we see that scripture clearly uncovers all of these ideas. It also warns about our emotions and our limited ability to see what's ahead, right?
Mark Biller: Yeah, absolutely. Our emotions regularly can overpower us, and we see that in markets whenever the stock market, especially, is at a top or at a bottom. People react very emotionally. No surprise, Paul told us back in Romans 7, "For I know that good itself does not dwell in me, that is in my sinful nature, for I have the desire to do what's good, but I cannot carry it out." So even when we want to do the right thing, our emotions make it hard for us to do that.
And then to the point that our vision is limited, James 4 tells us, "Now listen, you who say today or tomorrow we'll go to this or that city, spend a year there, carry on business and make money. Why, you do not even know what will happen tomorrow. What is your life? You're a mist that appears for a little while and then vanishes."
Rob West: Yeah, that puts it all in perspective. Well, we're going to continue to unpack this. What's driving the decisions you're making with your investments? Also your phone calls, 800-525-7000. Mark Biller here, stick around.
SEGMENT 2
Rob West: We're talking about your decision-making specifically around investing and managing emotions and risk that comes with it, and as Mark Biller has shared with us today, biblical wisdom is the best defense against emotional investing. Mark is here today, he's our go-to guy on the markets and your portfolio. He's taking your questions today, so if you have something in your wrestling with in your life related to your investments, your portfolio, perhaps the best strategy for you moving forward, maybe something related to the economy, we are prioritizing those investing-related questions today. Mark is here throughout the broadcast. Now is the time to call. We do have some lines open. We'll get to those calls here in just a moment. So, 800-525-7000 is the number to call. That's 800-525-7000. If you'd like to check out the article we're talking about today related to biblical principles of investing and even Sound Mind Investing's approach, whether through the newsletter or the private client group, just go to soundmindinvesting.org to learn more.
Now Mark, before the break, we talked about these ideas that our wisdom is flawed, we talked about our emotions and how they can affect our decision-making, also our limited ability to see what's ahead. So if we know these weaknesses are a part of human nature, how should that change the way we approach investing?
Mark Biller: Yeah, I think there are a couple pieces to that, Rob. You know, SMI has long taught that individuals can become better investors first by understanding what these counterproductive behavioral tendencies are, and then following that up by learning how we can moderate them, how we can put boundaries in place that will help us to follow the time-tested investing practices and rules that are rooted in scriptural principles.
So first we need to understand ourselves, then we need to put in these protective barriers or boundaries to kind of keep us on the right track. And so we try to do that in our strategies. It's also why SMI has, has always tried to weave these biblical precepts into our investment counsel.
And there are really three particular ways that we address some of these common behavioral issues that work against people's long-term investment success.
Rob West: Hmm, yeah. Let's dive into those and in just a moment we'll begin taking your phone calls. So now is the time to call 800-525-7000. We have a few lines open with your questions for Mark Biller today. Mark, let's start with selling. You recommend strict, non-emotional selling guidelines. So what behavioral problems are those designed to protect us from?
Mark Biller: Yeah, well, selling guidelines, Rob, are a key defense against what the behavioral economists call the endowment effect.
And that is simply the tendency we all have to value something more highly than we should just because we own it. So, having a strong selling discipline is going to help us protect against that. It's also going to help protect against the idea of sunk costs, which refers to the difficulty that humans have in parting with something that they've invested in.
You know, without these types of strong and importantly mechanical selling disciplines, we'd be just as prone as anybody else to falling in love with certain investments after a run of success, or on the other hand, wanting to hold on a little longer hoping losing positions get back to break-even.
And we don't have to go back very far to think of some really clear examples of this, Rob, right? About a year ago, we were doing programs together about gold, which was just ripping higher, and lots and lots of people wanting to pile into gold after it had gone up so much.
We were saying, oh, be careful. We're getting this kind of parabolic rise. Then you go back about six months ago and it was the same thing with the semiconductor and AI stocks, and we were doing a program then about the the parabolic bubble-like tendency of the market right then.
So having, you know, these built-in mechanical disciplines to not race in and not sell out in fear when the market's plummeting, those are really, really important baseline guidelines for investors.
Rob West: Yeah, those are really helpful. Let's try to sneak in a few phone calls here along the way. Still a lot more to talk about related to this topic and the article at soundmindinvesting.org.
Let's go to Indiana. Allen, how can we help you, sir?
Allen: Just good morning. Thank you for taking my call.
Rob West: Sure.
Allen: I have, I have an equity and fixed income portfolio, approximately 70% equities and 30% in fixed income.
Allen: Most of those fixed income instruments are ETF bonds. My question is, in light of interest rates likely going up or the possibility of them going up, what would be the way forward that, that Mark or you would be able to help me with in terms of the existing bond ETFs I have? I noticed they've gone down about 2% or so in the last 30 days. So hopefully that helps.
Rob West: Yeah, very good. What do you have a sense of what bond ETFs you have in terms of duration?
Allen: Yes, a great question. I don't know the portfolio average for the, the entire account, but, uh, I think most of them are intermediate, perhaps some as long as 10 years.
Rob West: Okay. Yeah, very good. Mark, your thoughts?
Mark Biller: Yeah, good, good stuff, Allen. So, first I'll lead off on a little bit of a hopeful note for you, and that is, you know, it's no surprise people who've listened to me on these programs over the last few years are probably aware that I have not been a big fan of bonds.
It's, it's been a real challenge, uh, really since COVID when interest rates started to rise, uh, for those who aren't familiar with how bonds, uh, and bond ETFs work, rising interest rates mean falling bond prices.
So in COVID, interest rates got down as they bottomed out with the 10-year Treasury yield at about 1/2 of 1%. That 10-year Treasury yield then over the last five or six years has gone up to over 5%. So as those interest rates have come up dramatically, bond prices have sold off and it's been a really tough ride for bond investors.
The hopeful part of that, Allen, is that with interest rates where they are today, we actually have good reason to expect that bond performance will be quite a bit better than it has been over this period when those rates were rising so much.
To go from 1/2 percent to 5%, that's an enormous rise. And, you know, even if rates were to go from say 5% to 6%, that's a much smaller incremental move.
Plus, with bonds, you're always earning the interest rate that is attached to those bonds, which is over 5% today.
So that's going to help buffer any kind of further losses from rising interest rates.
Some listeners are probably going, holy cow, Mark actually sounds like he's positive on bonds for the first time I ever remember.
And that's fair, you know, it, it's an ironic thing that as this asset class has done so poorly recently, it actually, ironically, becomes much more attractive.
It's kind of like with the stock market, when it falls and falls and falls in a bear market, at a certain point you look at how much it's down and you say, wow, that actually's starting to look attractive on the buy side.
So Allen, I guess the first point is just don't necessarily despair and go too far off of what you think really is the appropriate long-term stock bond allocation for your portfolio.
And maybe we'll touch on a couple other points after the break.
Rob West: Yeah, that sounds great. Allen, we'll let you go. You can certainly listen in. We'll get to the rest of Mark's thoughts after this break.
More questions ahead. Mark Biller here today. We're talking about investment decision-making on Faith and Finance. Stick around.
SEGMENT 3
Rob West: We're talking about better decision-making for your investments today. The field of behavioral economics has revealed some things that we've known for thousands of years that come right from God's word, and Mark Biller has a great article on that topic at soundmindinvesting.org. You can check it out when you visit soundmindinvesting.org. While you're there, if you're a do-it-yourself investor, the SMI newsletter has been a trusted resource for decades for our listeners. Check it out while you're there. Also, if you want to delegate that, the private client group is available. Mark leads that team as senior portfolio manager. All of that and more at soundmindinvesting.org. We're taking your calls as well today at 800-525-7000. We'll get to as many calls as we can and we will prioritize those questions related to investments. So, if you have a question about your strategy, your portfolio, something for Mark Biller today, call right now, 800-525-7000. Mark, before we head to another call before the break, we were talking about bonds, and I'd love for you to finish for our caller.
Mark Biller: Yeah, it's worth taking a little extra time on, Rob, because understand it or not, right now, interest rates are at the heart of everything going on across markets. We've had a really rapid rise in rates since about the end of August. The 10-year Treasury yield was about 4.6% then. It then shot up to 5.3%. That's a very fast move in a very short amount of time. It's backed off a little bit since, but those ripple effects have definitely been felt across the stock market, especially smaller-cap stocks that are more interest rate dependent. So it's really worth understanding what's going on with these interest rates and what we can do as investors to defend against those. So, like we were saying before the break, you know, ironically, they're a little bit more attractive now. So we don't necessarily want to throw all the bonds out at this point, but there are some really easy steps we can take. One of them, you hinted at with Allen when he was on the call there, and that is look at the duration of the bonds that you hold. Right now, and really this is true most of the time, but especially right now, that intermediate-term bond market, which is roughly 7- to 10-year bonds, that tends to be the sweet spot for the bond market. I say that because, historically, longer-term bonds, longer than 10 years, you get a lot more risk with only a little bit more return, so it's not a great tradeoff. And on the real short-term end, you tend to not get nearly as much return as intermediate bonds tend to provide. So that's a real easy thing that anybody can do who owns bonds in their portfolio: check the duration, look for those good intermediate-term bond funds, that's 7 to 10 years, that's usually a good sweet spot. Another really easy thing to do is our SMI bond upgrading strategy recommends four funds that have done real well through this period, have outperformed the US bond index over that time. So that's a real simple way, too, to try to hone in on some better options. And then the last one, Rob, that I would recommend if people are interested in digging a little further, is there are a type of bond ETF, they're fixed-duration bond ETFs. iShares iBonds is one that you can look up as a starting point. There are other brands as well. But what these do is they target a specific year that the bonds in that ETF expire in that certain year. So you'd be looking for something like iShares iBonds 2029 or 2030. And what those do is it's a lot more like owning a portfolio of actual individual bonds. It insulates you from rising rates and the interest rate risk that we've been talking about, as rates go up the bond prices go down. These do a lot less of that. So it's more like owning your own individual bond, and so that can be an appealing way to kind of fight off some of this rising interest rate risk as well.
Rob West: Yeah, that's all really helpful. I know this is a question that a lot of folks are wrestling with just given the decline that they've seen in this portion of their portfolio with bonds over the years. Taking your questions today, 800-525-7000. Investing-related questions are the priority with Mark Biller, but we'll try to sneak in a few others as well.
We'll be headed to Ohio in a moment, John, thanks for your patience. We'll go to Alabama next though, Gary, go ahead, sir.
Gary: Good morning, gentlemen. Thanks for taking the call. So, you were talking about wisdom in financial decisions, and I'll try to give you a little backstory. I'm retired military, so I've got a pension, I got good things going there, and since I retired I've gotten into income properties. And I've bought storage buildings, and I've been really lucky and favored by the Lord in my dealings, selling. I've doubled my money here, I've tripled my money there on dealing the property, selling them. But then, as I got bigger, as I got more stuff, more doors with regard to storage, I ended up buying a property and I didn't do my proper due diligence on this property. And I've got, I'm like slaved to it now. I've got more income than I've ever had, and because it's passive income, that's great. But I've assumed this debt load and, you know, I just guess the moral of the story is make sure you do your due diligence, because I'm kind of teetering with this debt load that's over, over about seemingly out of control. And I bought some toys counting on a sale of a certain property, and it hasn't sold. It's been on the market for a year, and actually the realtor who was listing it kicked me to the curb because, I don't know, I guess it's too small of a property for him to want to deal with, and I don't know, there's not a demand, it's a rural location. So there's all these variables, and I could go on, and I know the solution isn't handled in a two-minute phone call with you guys, but certainly maybe y'all have some counsel or can double tap, do your due diligence when it comes to buying properties, you know?
Rob West: Yeah. Yeah, well I appreciate your transparency and vulnerability, Gary, and I know this is going to serve as a reminder and encouragement to our listeners today. I would love to share some thoughts, and we'll get Mark's as well. We're up against a break here; we'll do that right after the break and head to more questions as well. This is Faith and Finance, stick around.
SEGMENT 4
Rob West: Great to have you with us today on Faith and Finance here on American Family Radio. I'm Rob West. Have you thought about the emotions behind your investment decisions? How is that impacting you? Well, behavioral finance has a lot to say about it, but it's not new. It comes from God's word. We understand from the timeless principles in scripture how our wiring and our emotions can affect every decision we make, certainly those decisions related to money and investments. Mark Biller is here today. He's written an insightful article on this topic, biblical wisdom and how that intersects and is a defense against emotional investing. You can check it out at soundmindinvesting.org.
Before the break, we were talking to Gary. Gary is a former military. He's got a pension from his service. He also started investing in real estate, did very well, has had a double and a triple along the way, but then got into a property that, to his point, he didn't do the proper due diligence, and he's now paying for that. And other than just serving as a reminder to each of us on the importance of not getting ahead of ourselves, especially when we've had some early wins, just wondering if there's any advice for him.
And Mark, I'll let you weigh in in a second. I'll just say first, Gary, thank you for your service to our nation. Obviously, you've worked hard, you've made some wise investments, you've built substantial assets. One, I'll say bad real estate decision doesn't erase all of that. But I do think in terms of the practical steps here, number one would be let's, you know, really be on our guard against taking on any additional debt. I'm not hearing you're interested in that, but I just want to put that out there. Let's not try to invest your way out of this situation by purchasing another property or taking on another big risk. I think it's always important, and I suspect you've done this, but get a complete picture of your finances. You know, list every property, its realistic market value, the outstanding mortgage, the interest rate, the payment, the rental income, and operating expenses. And then identify which properties are helping or hurting, and then we could look at, you know, considering selling some assets to eliminate the debt. You mentioned the doubling and the tripling, and you know, that's wonderful. Maybe we can turn some of those gains into the financial security that you're looking for.
And then it sounds like, you know, replacing that realtor—maybe it's not easy because of the rural nature of this property, but getting somebody, you know, fresh in there who's willing to really work with you and take this seriously, and try to get this aggressively marketed in such a way that you could unload it and wind this down, especially if you're not looking to sell some things. So I would say, you know, those are probably the next steps here as you move forward. Mark, anything else you want to add?
Mark Biller: Yeah, you know, as Gary was describing this, it really just made me think of what we mentioned earlier in the program: that idea of sunk costs, that sometimes because we've put so much effort, blood, sweat, and tears into into something like this property, it can be really hard to see clearly, and then really hard to get rid of it. As you were just saying, Rob, you know, sometimes you need to maybe even take a deal that doesn't seem like a great deal, just to kind of get rid of of the asset.
You know, the key to that sunk costs idea—and this is true with all of us, even in our just normal stock bond portfolios—is asking ourselves: "If I didn't already own this, would I buy it today at this price?" You know, and so I think there's a lesson maybe in there for Gary where if you were to look at that objectively with outside eyes to see, okay, maybe this isn't a great deal, but if I can get out of it, rinse my hands of it, maybe that is, you know, my way forward.
You know, I would also say, Rob, you know, first and foremost, in a situation like this, always, you know, asking God for wisdom. He tells us He gives it generously to us without finding fault, and then just asking Him to show what the path forward should be. That's that's certainly, you know, step number one.
Rob West: Yeah, very good. Gary, is that helpful?
Gary: Tremendously. Thank you. Thanks, Rob.
Rob West: All right. Lord bless you, my friend. Thanks for calling today, and call anytime if we can serve you.
Let's see. Let me head to Ohio. John, you've been waiting patiently there. How can we help, sir?
John: Yeah, I have kind of like a two-part question. The first one being I got a refinance on the table looking at me. I'm currently got a 3.6 on my mortgage right now, and they want to offer a 5.8 for 15 years. And of course, the tax and insurance is included in everything. And they want to do a cash out, 20k, and then I was only thinking of even possibly doing that just for the fact of it kind of alleviates a little bit of that—I hear you talking about nest egg and having something set back for the, you know, the difficulties you'll face, because you'll, you know, face difficulties eventually, something will break. And does it make sense to do something like that as far as refinancing for 5.8 just to get that comfort zone and pay off some debt and have a end date of when it's paid off, like for 15 years?
Rob West: Yeah. Typically not. I would be very hesitant, John, to give up a 3.6% mortgage that—we have some listeners going, "I would love to have a 3.6% mortgage right now!"—especially when you're replacing that at something 6% or higher, or even 5.8%. And I would also be hesitant to roll unsecured debt into your mortgage and secure it by your home. I realize, you know, if you're trading—if this is credit card debt, and you didn't say that, but if it is, 22% to 30% for roughly 6%, I can understand why on paper that makes some sense. But we're also, you know, taking something that's unsecured, we're making it collateralized by the home, and we're giving up that, you know, that really attractive rate, which over the next 15 years, I mean, my just quick math here is, I mean, that could be as much as $40,000 more in interest just by increasing that, you know, that rate, you know, depending on what that balance is, but that would be on a $200,000 mortgage.
So, you know, I would probably leave that alone. If you need to do some things that require or that really are improvements to the home, I'd use a home equity line of credit for that, and then just plan to try to pay it back as quickly as you can. If it's credit card debt, I'd use Christian Credit Counselors, and let's try to get that interest rate down, but let me leave the debt right where it is. And then really we need to make sure we've solved the issue that got you into that debt in the first place, which is, yeah, let's limit lifestyle, try to build up that emergency fund, and live within your means so we don't, you know, we don't run those balances even higher. But I would not be in favor of of rolling that into the house.
John: Okay. The second question I have is—this'll be real quick—I did a Parent PLUS loan for my daughter for going to college, and course she's graduated and in the search of a, you know, a lucrative job right now, and you know, kind of tough to find. But when the loans are coming up due here, probably within two months, and do you recommend consolidating? It's four different loans when she went to college for Parent PLUS, and it's four different loans. You recommend a consolidation or an IDR or, you know, something like that to make the payment, you know, a little bit more manageable in case that job doesn't arise?
Rob West: Yeah. Yeah, I wouldn't rush to consolidate that just because the payments are starting. I mean, it can be helpful, it doesn't lower the interest rate. Essentially what it does is just, you know, rolls it all into one payment, so it simplifies it a bit. You know, the new rate would be a weighted average of the existing rates, assuming we're talking about—well, it would be with the Parent PLUS, that's a federal loan program—and then they round up to the nearest 1/8 of a percent, so it doesn't lower the market interest rate. It preserves the, you know, income-based repayment options if you ever needed those down the road, but essentially the main idea with that loan consolidation is just that it it rolls it all into one payment so you don't have multiple payments. So there's really not a huge benefit there. I think the key is, you know, as soon as she's able, if it is her responsibility, get her paying toward it, and for you, just try to pay it off as quickly as you can. Thanks for your call. We'll be right back.
SEGMENT 5
Rob West: Thanks for joining us today on Faith and Finance here on American Family Radio. Mark Biller's here today. We've been talking about investment decision-making and how God's word is really our best defense against decisions that are driven by emotions, which can so often be the case when it comes to our investing. Uh, we're going to get back to some of these key points from the article Mark has written on this topic, which you can find at soundmindinvesting.org in just a moment. But first, let's head to Alabama. Jackie, how can we help you?
Jackie: Oh, yes. And and thanks so much for helping me. I love it that you're both there for for good advice because I know Rob, you always give us the right advice, but it's always good to hear from someone else, too. Sure. So, um, thanks thanks so much. So, we're 76 and a half, my husband and I, and God has blessed us uh through a lot of saving and not spending to have like $300,000, uh, you know, in various cash available instruments, whether CDs, iBonds, uh, you know, et cetera. And then we would have about $800,000 in other money. And then our house is valued probably at $600,000, and uh it's like do we even need bonds? I don't think I've ever even gotten my bonds back from 2022. I have them in like the Vanguard Total Bond Market, 5 to 7 years. I'm about 60/40 uh 40% bonds, 60% stock. No, 60% bonds, 40% stock. But I don't think we're going to need this money, you know. And it's like shouldn't I be for God's kingdom putting it maybe into VYM or Noble, you know, the IRA type of money, or maybe um Fidelity has uh something that's a five-star rated Morningstar, um that is very good. It's 15% international and then it balances out 50/50. Um and it's done very well. I mean, should I just let that money that's earned like 1% in the last 10 years, you know, just do that? You know, I don't feel like a good I don't feel like a a good steward of this money.
Mark Biller: Yeah. Well, you sound very astute in in all that you're thinking about and doing here, Jackie, so well done. Mark, uh, what are your thoughts?
Yeah, you know, those those are great questions, and a lot of people are asking that right now, Jackie, because bond returns have been poor, and also because stock returns have been so good. And that's the piece that we have to always kind of put a little flag on, um, because anytime the stock market has gone up a lot, as the stock market has the last three or four years since 2022, it becomes really easy to just extrapolate that in our minds and kind of forget that the stock market is the way more volatile market, and that it's really easy to, you know, drop 25% of your value in your stock investments in the course of a year or 18 months, something like that. And so we don't want to get too far over our skis, uh, with the stock side. Um, now I will say the one little caveat there that I heard Jackie is the "I don't even feel like I'm going to need this money," and in a situation like that, if you if you really are quite confident that this is money that maybe you're going to be leaving to heirs or something like that, that does allow you to extend your mental timeline with the money a little bit longer. And that's important because we always say you shouldn't be putting money into the stock market unless you have at least a 5-year time horizon and preferably a 10-year time horizon. And that's where people in retirement typically will say, well, my time horizon is quite a bit shorter; therefore, I need to be getting more conservative. So that would be the one reason, Jackie, that you might be able to say, maybe I don't go quite as conservative, uh, with my stock bond allocation with this additional money as I have with the rest of my portfolio, if I really do think that I'm investing this for my heirs, maybe a 10, 20, 30-year time horizon time horizon, that can make a little bit of sense. Um, so hopefully that that helps a little bit.
Rob West: Yeah, I think the other piece here is just the answering the question how much is enough, that we all have the opportunity to answer, and that can intersect both with our lifestyle spending, what we're spending monthly, as well as our lifetime accumulation. And once we identify the fact that we have more than we need, one of the other benefits is we get to start aggressively increasing our giving, which according to God's word, Jesus said is more blessed, which can translate into Macarios, happy-making. It is more happy-making to give than to receive. So the joy we get from being involved in God's activity is uh is just fabulous, and I think so often we think, well, we'll do our giving at death, when in fact we could do some significant giving right now, uh if the Lord has has blessed you with more than you need. But, uh Jackie, is all of that helpful to you?
Jackie: It is helpful, and, you know, one thing is we do not have long-term insurance, and so we never know how much is enough, do you know? It's like my husband, the doctor said he's going to live till 95 or 100. Um, probably not me because I've had some serious things, but um it's hard to know, um, you know, with brain things, different things, it's like when do we say, uh, "Okay, Lord, this is set aside for you," and then, you know, you know, we don't have children. And so it's like, okay, uh that's a hard one, I think, you know, to figure out to figure out what you should keep aside, um, you know, not for me, but for him, you know? Yes. So, anyway.
Rob West: Well, I agree, Jackie, and and I don't mean to say that it it is simple. I think it ultimately is an act of trust. It's a conversation between you and your husband and the Lord, and, you know, at the end of the day, we know it's not ours, it's all His. We trust Him as provider, and we need to find that, uh, that healthy tension between, you know, saving and being prudent and and having reserves for the unexpected, and at the same time saying, God, I trust you as my provider, and I want to give, I want to be a conduit of your provision into the things that are advancing the gospel and loving our neighbor and in the name of Jesus, and, you know, there's not a right or wrong answer there, and I can't tell you what that is. Um, we did produce recently a field guide, um, that a lot of our listeners and sort of our Kingdom advisors have found really helpful, and it's really dealing with this one single question: How much money is enough? And it provides both a biblical perspective, some exercises and worksheets that you can work through to figure out the answer, and then some case studies of people who have actually done it that might be encouraging to you. I would love to put one in the mail to you, Jackie, if you would find that helpful.
Jackie: You know, that's very kind of you. Um, I was researching like that it's average $345,000 per person, you know, one of us will probably need it, so I kind of go on that, you know. Sure. Sure. Yeah, you're talking about long-term care?.
Yes, so I kind of go go on that, you know, so um yeah, so probably probably um you know, I figured it out in my own mind in a way, you know, and and your resources your resources are important for for others too, you know. Very good.
Rob West: Well, I appreciate you raising the question. Hopefully, uh, Mark's insights have been helpful to you, and we uh certainly appreciate your call today. If we can help further along the way, don't hesitate to reach out.
Let's see. 800-525-7000 quickly to Alabama. We're going to finish with Jim. Go ahead.
Jim: Hey, good morning. Uh, I was just wanting to present a question. I thought that I could do a better job of self-managing. I had subscribed to Sound Mind Investing for quite some time. Uh, primarily the money's I've had, uh, invested were in a simple IRA through work and didn't have a extra for other investing, and there are a lot of, uh, Christian, uh, financial and investment, uh, ministries. Some, I think, screen for secular, uh, secular companies that might be involved in things that you wouldn't want to, uh, invest in, and some may not. Yes. Uh, and then also beware of, like, your Kingdom Advisors and other, uh, Christian financial advisors that you can, uh, I guess, uh, employ or whatever. And I was wanting to get some advice, maybe in the Montgomery or Birmingham area, of reputable, uh, Christian financial advisors that might could help versus trying to manage things, uh, on your own.
Rob West: Yeah. Very good. Well, I I think you're exactly right here, Jim, you know, an increasing number of Christians are really wanting to think about the companies that they're part owners of and make sure that they're not misaligned with their values, particularly where they might be investing in companies, uh, that are misaligned with their values in certain industries. You know, a lot of times that starts with anything that might be connected to abortion or an abortion drug or alcohol or tobacco or pornography, things like that, gambling. Um, and it can go beyond that based on the, you know, unique values, uh, of each investor. And the good news is there are investments that do that kind of screening on the negative basis where they screen out certain companies or industries, the positive basis where they're screening in companies leading to human flourishing, and then in other cases, they're even using the, uh, ownership position to engage with those companies, to have a thoughtful conversation with leadership. You know, you can go to findask.com, and when you choose the investing category, you'll be able to limit the church results to only those CKs that do what we call faith-based investing. And that would be the easiest way to get a list there in the Birmingham, Montgomery area. I'll also let you hold, and I'd be happy to, um, hand you off to somebody that, um, you know, I think could serve you in this particular way really effectively if you want to give your information to the team. We'll, we'll get, uh, get in touch with you after the show and, and help you get connected. But, Jim, I love the direction you're headed. I appreciate your call today, and stay on the line. We'll get your information. Mark, that's going to do it for us. Uh, final thoughts here before we wrap up.
Mark Biller: You know, Mark, it's always going to be unpredictable, and our human nature is going to tug at us all different directions, but if we can apply biblical wisdom to that, our investment decisions, it'll help keep us on the right track.
Rob West: That's well said. This article is available for you, folks. It's at soundmindinvesting.org. While you're there, as Jim said, you can, uh, check out the Sound Mind Investing newsletter. It's been helping Christians who were do-it-yourself investors for decades, uh, manage their portfolios. Also, the private client group is there that Mark leads. They'd be happy to serve you. soundmindinvesting.org. Mark, thanks for your time today.
Mark Biller: Always a pleasure, Rob.
Rob West: All right. Big thanks to Michael, Devin, Patty, Pat, everybody here at FaithFi that makes this possible. You want to support us, go to faithfi.com/give, and then come back and join us tomorrow.
The field of behavioral economics has revealed something the Bible has been telling us for thousands of years. What is that, you say? It’s that we’re not nearly as rational as we think we are— especially when money is involved. On this Faith & Finance on AFR, Rob West and Mark Biller show how biblical wisdom can help us overcome some of the behavioral tendencies that work against us as investors. Then, it’s on to calls.
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