Ask the Coach
Question: A friend of mine is really good at investing and has told me that I need to invest in order to have enough money in retirement. I’ve never invested before. How do I start?
Answer: Investment strategies are described in countless books and by a multitude of counselors. And I am not a financial advisor. However, I can share a few simple strategies that can get you on the road for your investing journey.
One of the first keys to successful investing is to find a financial advisor/coach. Financial expert Nick Murray offers this advice: “While it’s important to have an advisor whose technical capabilities you respect, it will prove far more important to have an advisor who you can trust—literally with your family’s financial life. Do not care what they know until you know that they care,” (Simple Wealth, Inevitable Wealth, 35).
Friends and family, someone in your organization where you work, and your attorney or accountant may be able to give you some options.
Another key to successful investing is diversification, which reduces the risk by spreading investments around several categories. A model of diversification offered by several financial experts is:
- Investments
- Stocks
- Bonds
- Cash
- Stocks
- Large-cap growth
- Small-cap growth
- Large-cap value
- Small-cap value
- International
While diversification does not assure a profit or protect against loss of principal, it can help reduce overall volatility in the markets and reduce the overall risk in your portfolio.
A third key is to plan for long-term steady growth and to stay invested. As Murray explains it, “Investing should be like watching paint dry or watching grass grow!” Slow and steady. Del Johnson, former Director of North American Division Retirement Plan, gives an example of an investment concept called The Best 10 Days:
“If $10,000 were invested in the S&P 500 Total Return Index on January 3, 1995, and left to grow until December 31, 2014, a period of 20 years or approximately 4,900 trading days, the investment would have grown from $10,000 to $65,000.
“However, if a cautious investor had tried to time the market, and missed just the 10 best days, the asset at the end of 20 years is only $32,000. If he missed only the 40 best days, less than one percent of the total days, he’d have experienced a loss, with only $9,000. Investors continue to find indicators to help them predict the best and worst trading days. They’ll get rich,” (Financial Wellness, Adventist Retirement, 14).
Fourth, it is advisable not to embark on an investment program until your debt situation is under control. Financial expert Dave Ramsey has developed what are called The Baby Steps. They give a progression to follow in your financial planning:
- Step 1: Save $1,000 for your starter emergency fund.
- Step 2: Pay off all debt (except the house) using the debt snowball.
- Step 3: Save three- to six-months of expense in a fully-funded emergency fund.
- Step 4: Invest 15 percent of your household income in retirement.
- Step 5: Save for your children’s college fund.
- Step 6: Pay off your home early.
Last, you can choose to screen your investments, so you are not contributing to companies manufacturing or distributing objectional products. The specific screens are as follows:
- Gambling
- Pornography
- Alcohol
- Tobacco
- Meatpacking
- Caffeine
- Armaments
God bless you as you seek to faithfully manage the resources He has given you.
By Bonita Shields, Vice President for Ministries, North American Division of Seventh-day Adventists