September 18, 2025 • 42 mins
When markets soar, investors face a subtle but dangerous temptation: trading wisdom for excitement. With headlines touting record highs, it’s easy to get swept up in the momentum. But is now the time to double down—or to take a step back and exercise caution? On the next Faith & Finance Live, Rob West and Mark Biller unpack the dangers of investing with emotion instead of wisdom. Then, it’s your calls and financial questions. That’s Faith & Finance Live, where biblical wisdom meets today’s finances—weekdays at 4pm Eastern/3pm Central on Moody Radio.
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Transcript
Episode Transcript
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S1 (00:08):
When markets soar, investors face a subtle but dangerous temptation,
trading wisdom for excitement. Hi, I'm Rob West with headlines
touting record highs and optimism running wild. It's easy to
get swept up in the momentum, but is now the
time to double down or to take a step back
and exercise caution? Today, Mark Behler joins us to unpack
(00:30):
the dangers of investing with emotion instead of wisdom. Then
it's on to your calls at 800 525 7000. This
is faith in finance. Live. Biblical wisdom for your financial decisions. Well,
it's always a pleasure to welcome Mark Behler, executive editor
and senior portfolio manager at Sound Mind Investing. A long
(00:52):
time and proud underwriter of this program. Mark, great to
have you back.
S2 (00:55):
Thanks, Rob. Always a pleasure to be with you.
S1 (00:58):
Mark. The markets have made a strong comeback, no doubt
since spring, and many investors are feeling optimistic about even
the year ahead. So how would you describe the mood
right now?
S2 (01:10):
Yeah, Rob, I mean, investors mood has shifted from really
intense fear back in early April to optimism and arguably
even excessive optimism at this point. That can be a
danger sign, because just like fear often leads to bad
decisions during bear markets, when investors get excessively optimistic, that
(01:33):
can lead to bad decisions during bull markets. You know,
the danger is that people allow their emotions to override
their sound judgment and in our context, their long term
investing plans.
S1 (01:47):
Yeah. No doubt. I'll certainly second that. Now, you note
in your article in the latest SMI newsletter, it's called
Bull Market. Great. But don't get carried away that we've
been here before. So what lessons, Mark, should we remember
from the past?
S2 (02:02):
Yeah, well, we've seen episodes of excessive optimism before. You know,
the the classic example was in the late 1990s during
the.com bubble. You know, the euphoria back then was contagious,
but eventually the bubble burst and that wiped out huge
amounts of wealth. So while the hot new technology of
(02:23):
that era, which was the internet, did go on to
fulfill its promise and it did change the world, a
lot of those early companies ended up failing, and even
those that survived ended up losing 80 to 90% of
their value over the next few years. Investors who threw
caution to the wind in the late 90s ended up
(02:45):
paying a pretty steep price over the early years of
the 2000.
S1 (02:50):
Yeah, and we certainly don't want to repeat that. So
how should we approach the current market optimism? Is there
a healthy way to keep it in check?
S2 (02:57):
Yeah there is. And first of all, I should be
clear that it's worth pointing out that long term optimism
by investors is normally rewarded. You know, if you look
back over history and all the wars and depressions, recessions
and bear markets, despite all of that, stocks have trended
upward for more than a century. So we're not arguing
(03:19):
against long term optimism and being a stock market investor.
It's more the short term acute excessive optimism that can
be dangerous because it tends to lead to overconfidence. And
then the assumption that markets are going to keep rising
without interruption. And that's just never been the case. You
know pullbacks in bear markets are part of the deal
(03:41):
as an investor. So the big mistake Rob that many
investors make is they project the current market environment indefinitely
into the future. So since October of 2023. Less than
two years ago, the stock market is up about 60%. Now,
historically speaking, that's about six years of normal gains that
(04:05):
we've packed into a period of less than two years.
So if investors start expecting those types of gains to continue,
or worse yet, they start shifting into even more aggressive
investments that have performed really, really well lately. Well, that's
when people often get hurt.
S1 (04:25):
Yeah, no doubt about it. And do you see people, uh,
you know, trying to time the market in situations like
this because they have so much upside already baked in
that just even with a hint of a correction, they're
trying to go to cash or something like that. I mean,
is that more prevalent in an environment like this?
S2 (04:43):
You know, I actually tend to see more of the opposite. Rob.
It's it's that because everything has worked so well, any
kind of pullback automatically is a dip that we need
to double down even more. We need to buy every dip.
And then the other big mistake is if you have
a well-diversified portfolio, undoubtedly you're going to have some things
(05:05):
that aren't performing as well. And when the market has
done so well, people start chucking those investments overboard and
doubling down on the really aggressive stuff that's been posting
the big returns lately.
S1 (05:18):
Mark Miller here today we're talking markets back with more
after this stick around.
S3 (05:34):
The opinions offered during this program represent the personal or
professional opinions of the participants, given for informational purposes only.
Any information provided is not intended to replace advice from
a financial, medical, legal or other professional who understands your
specific situation.
S1 (05:58):
Great to have you with us today on Faith and
finance live. Mark Biller here today we're talking about these
markets which have just been red hot. And that continues today.
The Dow Jones closing up a quarter of a point.
The S&P 500 up another half a point by the
way S&P small cap Russell both at fresh all time highs.
(06:18):
We've got the Nasdaq up 1% today I mean Mark
we've just got some real momentum here. What is your
take on whether or not this continues from here. And
I don't want to fuel the fire for our conversation today,
but I'm just curious.
S4 (06:33):
Sure. Yeah. That small cap Russell 2000 all time high
is a really significant one. Rob. You know, whereas the
large companies in the S&P 500 and the Nasdaq index,
this is like their 26th high of this year. Wow.
The small caps. They have not been participating nearly to
(06:54):
the degree that the large companies have. In fact, today
was the first new high for the Russell 2000 since
November of 2021, almost four years ago. So this whole time,
small caps have been fighting to get back to that
2021 high, and they finally closed above it today for
(07:15):
the first time. So what that tells me, Rob, is
it's really exactly what we'd expect following rate cuts. You know,
the start of a new rate cutting cycle, which happened yesterday.
What it tells me is that we're getting broader participation.
Investors are starting to feel comfortable moving away from just
(07:37):
those highest quality, largest US market leaders. You know, the
Fang stocks, the Magnificent Seven, um, those those big names
that everybody knows and are starting to broaden out into
small caps and other stocks. Um, like you said, it's
not we're not trying to fuel the fire today, but
(07:59):
I think it's a great counterweight to what we are
talking about with with the excitement, the overconfidence, perhaps the
high sentiment among investors. We're kind of just bringing some
cautions today. But on the flip side of that, we're
absolutely not saying because we're at all time highs, you
(08:20):
need to sell, you need to raise cash, you need
to head for the bunker. That's not the message today.
Because really, with the economy looking pretty healthy and the
Federal Reserve starting to cut rates, uh, expecting that this
is the first of multiple rate cuts to come. You know,
there's a really strong case to be made for kind
(08:42):
of a Goldilocks environment. And there's really no specific reason,
no imminent reason, to expect that the market is going
to do poorly or roll over from here. Of course,
nobody knows what the future holds. That's part of the
point of today's program and our discussion. But I do
want I like that you asked that because I want
(09:04):
people to hear the balance here. We're saying continue to
follow your plan, continue to apply the principles that you
hopefully put in place for your investments when markets were calm,
and don't get carried away and ditch those principles in
the chase for the hot stuff. But at the same time,
(09:26):
that's not the same thing as saying this is a
scary market. You need to be careful, that kind of stuff,
because that's really not the case. It's a good market.
It's arguably a Goldilocks environment for investing. Um, so, you know,
stick with that plan and enjoy the gains because they
don't always come this easily.
S1 (09:45):
Yeah, that's exactly right. That's very well said, Mark. By
the way, if you want to read this article we've
been talking about today, just head to Sound Mind investing.org.
It's titled Bull Market. Great, but don't get carried away.
It has some really sound sage advice for you in
a market like this. Again, sound mind investing. We are
taking your questions as well. Today we want to prioritize
(10:07):
those questions on your investment portfolio, the economy, the markets.
Maybe you're wondering, is this the time to start investing?
Or maybe I've been on the sideline. How do I
move in? Maybe you're transitioning into another stage of life,
perhaps into retirement, wanting to know what's the right investment
mix for you? Mark Miller here today taking those questions
at 800 525 7000. We've got some lines open at
(10:31):
the moment. Uh, but go ahead and call right now
800 525 7000. Let's go out to Clearwater, Florida. Steve.
Go ahead.
S5 (10:40):
Yes. Hey, Rob. Hey. How are you doing?
S1 (10:42):
I'm doing great. Thanks for your call, sir.
S5 (10:46):
Oh, great. Hey, I just wanted to check with you because, um,
I'm 60 years old, and I had. I have some
bene IRAs that are invested with Raymond James and Lincoln Financial,
and it's it's it's pretty, pretty good sum of money. And, um,
I'm still working right now, but I was just wanting
(11:07):
to get your opinion if if, um, I went to
a sales presentation for, uh, a life annuities. And, um,
before I make the decision whether I want to go
into annuities, I was thinking about maybe putting 250,000 into
an annuity. That'll leave me about 750 left in the
(11:27):
stock market. I was wondering, um, what your opinion is
on that? And you said, like, 6 to 8, um,
a fixed annuity. Uh, would that be something that would
be beneficial to me to kind of, um, you know,
have that security that I don't lose at all or
I don't have a big downturn in the stock market.
S1 (11:46):
Yeah, Mark, we get a lot of these questions as
you well know. What are your thoughts? How do you
think about annuities in light of just regular stock market investing?
S4 (11:55):
Yeah, it's a great question, Steve. One thing that I
do like about the way you've asked the question is
you're asking about taking a portion of your investments and
and doing an annuity with that. Um, I like the
idea a whole lot better when someone's talking about a
relatively small portion. Um, because the main appeal of the
(12:18):
annuity is that downside protection. And what you give up
in order to gain that security is typically the prospect
of earning higher returns, um, which, you know, are probably
probably reasonable to expect you would earn higher returns if
you were investing that money outside of the annuity. Um,
(12:40):
at least if you're investing it well. And of course
annuities are typically going to carry higher expenses higher all
in costs. So those are some downsides to consider. Um,
a lot of it does come down to the personal
preference of how afraid somebody is that they're they're going
to lose a lot of money in a market downturn. Um,
(13:03):
there are some some newer products that actually, um, kind
of offer a similar kind of, um. Pro and con
as the annuity. The buffered ETFs are often the referred
to that way where they can limit the downside, but
they don't lock up your money the way annuities do.
(13:26):
That's another big downside of committing to an annuity is
usually your money is locked up for a long period
of time, uh, with surrender fees and so forth. So, um,
I don't love annuities, Steve. Um, but if you're going
to do it, I do like the idea of doing
it with a smaller portion of the portfolio. Leaving most
(13:47):
of the portfolio for traditional investing.
S1 (13:50):
Yeah, I think that's well said. And Steve, hopefully that
gives you some good insight there. Mark's right on. You
know the pros are guaranteed income principle protection perhaps some
tax deferral. The downside is complexity fees liquidity limits and
opportunity cost. What are you giving up on the upside
that could be managed through a properly diversified portfolio. So
(14:13):
at the end of the day, I think you're right
on in that if you do go ahead with it,
just a small portion is probably the right approach. Thanks
for your call. More of your questions for Mark Miller
today right after this break. Stay with us. Mark Miller
(14:35):
here today on Faith and Finance Live I'm Rob West.
We're talking about this bull market that once again has
hit new all time highs today on both the S&P
500 and the small cap Russell following the fed rate
cut of 25 basis points. We're prioritizing your calls today
on anything related to the markets and the economy. We'll
(14:56):
talk to Ron in Atlanta here in just a moment
Ellen in Chicago we've got room for more questions. If
you have a question for Mark Miller today, call right
now 800 525 7000. Um, Mark, what about the financial
media and the role that it can play and just
our exuberance related to these markets? How should we think
(15:17):
about that?
S4 (15:18):
Yeah, it's important, Rob, to understand that with the expansion
of financial media to these channels that are now 24
over seven market news, you just have to understand that
they have to fill a lot of airtime with market stuff.
Even if there isn't necessarily really important market stuff to
(15:41):
be talking about. And what that means is there, they're
always going to thrive on the current hype, if that's
good hype. Like right now. Beautiful. If it's bad hype
when the markets are falling, that's fine with them. They
just want to keep your attention. And so that dynamic
really actively fosters the fear of missing out. And that's
(16:04):
the prevalent thing right now that tends to nudge people
into taking on more and more risk after markets have
already produced these big gains that we've been talking about.
So if I'm listening to that kind of content on
a regular basis, and I'm constantly hearing stories about people
who've struck it rich in this or that investment, or,
(16:28):
on the other hand, predictions of how far this market
might run, whatever the next big thing is. um, that's
that's going to influence me, but not necessarily for the better.
It's not going to make me a better investor in
most cases. And really, that kind of noise, um, usually
distracts people from their long term goals. Their long term
(16:51):
plans kind of moves them off the mark of what
they ought to be focused on for their personal investing.
S1 (17:00):
Yeah, that makes a lot of sense. And I think
something we need to just really be on our guard against.
And perhaps if you're finding yourself anxious or it's leading
you kind of a ways away from your rules based,
time tested approach, perhaps turn down the noise of this world,
turn up God's voice, and remind yourself of who your
source truly is, because that financial media can do a
(17:21):
number on you if you're not careful. All right, let's
grab a few phone calls here while Mark Biller is
here today, we've got some lines open at 800 525
7000 to Atlanta, Georgia. Ron go ahead.
S6 (17:33):
Yes, I am 66 years old and plan on deferring, uh,
Social Security until age 70. My wife is ten years
younger than me, and I'm trying to figure out when's
going to be the best time for her to start, uh,
Social Security when she gets 50% of what? What my income, uh, generates.
(17:55):
My question is this. If she gets Social Security at
age 62, does she get half of what I'm going
to get? What I will get at 70? Or does
she get half of what I would have gotten had
I started Social Security at age 62?
S1 (18:12):
Yeah, it gets kind of complicated, but it's not either
of those, actually. Ron. Uh, so what happens is, uh,
her benefit or the spousal benefit is its starting point
is your full retirement age benefit. And the most she
can get is 50% of your full retirement age benefit.
but that assumes that she waits until her full retirement age.
(18:35):
So if she takes it at 62 again, we're going
to start at 50% of your full retirement age benefit,
not your age 70 benefit. And then we're going to
back it down based on the fact she's taking it
early and it's a permanent reduction. So for example, at
62 she's often going to get 32 to 35% of
(18:57):
your full retirement age benefit instead of 50%. But here's
the other kicker. You have to start taking your benefit
first before she can claim spousal benefits. You know, I
like to say you got to walk through your door
before she can walk through it. And so if you're
waiting until age 70, she wouldn't be able to turn
(19:19):
it on until you start taking it. And when she does,
it's going to be based on a max of 50%
of your full retirement age benefit. And then it's going
to start walking back permanently as a reduction based on
the number of years she takes it early.
S6 (19:37):
Okay. To answer my question.
S1 (19:39):
Okay, good. Thanks for your call. We appreciate it. Uh,
Chicago is where Ellen's located. Go ahead.
S7 (19:46):
Hi. Thank you for taking my call. Um, I am
also 66, like your previous caller, and I was planning
on working and not drawing Social Security until I reach 70. Um,
my kids and my. I live in Chicago, but my
kids moved out to Colorado and got married and started families.
(20:09):
So I'm expecting my fourth grandchild, um, in October, and
they would like me to move out there. I, I
didn't up until now because my mom was still alive,
but she passed about a year ago and, um. No,
it's all right. I would like to move there, but
(20:30):
financially I have not really planned for retirement, so I
have about $100,000 in a 401 K. I have about
$110,000 that my mother left me. I I'm in a
condo where I owe about $20,000, and I could probably
(20:53):
sell it for 1.35 in the current market. And the
problem is, it just all feels, um, the housing market
is much more expensive in Colorado. And ideally, I would
prefer to be in a tiny house with a yard
because I grow food. But it's just I'd be walking
(21:16):
into a 15 year mortgage. I'd be walking away from
a job. Do you have to go on break?
S1 (21:22):
I do, yeah. You know that sound? Well, this is
really helpful. And I'm so sorry to hear about your
mom's passing, and I understand your desire to wanting to
be near your kids and your grandkids and just trying
to make it all work financially. Let's do this. Um,
I'll get, uh, kind of the rest of the details
here during the break. And when we come back, uh,
I'll give you my thoughts right on the other side. So, Ellen,
(21:44):
you stay right there, and, uh, we will pick it
up here in just a moment. Folks. This is faith
in finance live. Mark Biller, our guest today, taking your
questions at 800 525 7000. We'll be right back. Thanks
for joining us today on Faith and Finance Live. We're
(22:06):
talking about this red hot stock market and making sure
that we don't violate those principles. We know to be true,
that are time tested, that find their roots in God's Word, namely, uh,
diversification and a long time horizon. Mark Biller is here today.
We're taking your calls and questions as well. By the way,
if you have an investing related question, we'd love to
(22:26):
get a few of those in today. Anything related to
your portfolio? The market's call right now while Mark's here.
800 525 7000. That's 800 525 7000. Uh, before the break,
we were talking to Ellen in Chicago. Uh, Ellen is 66.
She's still working. Her plan was to delay Social Security
until 70, where she could get about 4000 a month.
(22:49):
She's got 100,000 in A41K, 110,000 from a recent inheritance,
a condo worth about 135,000 with a small mortgage. She's
considering moving to Colorado to be closer to her kids
and grandkids. Her concern, though, is a higher cost of living.
More housing costs, possible pay cut. Um, and, you know,
would love to have a single family home, perhaps even
(23:11):
a small, tiny home where she could grow food, live simply. Uh,
she likes to garden. And, you know, the challenges are
that potential higher cost of living, a smaller income, a
new mortgage in her late 60s with modest retirement savings
and the main income source being Social Security wants a
small pension, runs out, and she's no longer working, and
(23:33):
she doesn't like the idea of taking on debt. So,
you know, I think here, Ellen, first of all, make
this a matter of prayer. Ask God to give you
wisdom and just make it abundantly clear what you're to do.
If you stay in Chicago until 70, the pro is
you keep your current salary, you pay off the condo,
you save more, and you have the delayed retirement withdrawals,
which gets that income up, that retirement income. The downside
(23:55):
is you're away from the kids and grandkids longer if
you move to Colorado now. Yes, you're closer to family,
but you've got those higher costs, a possible pay cut,
and we don't want that mortgage to be a strain
on your future cash flow. So perhaps I would say,
let's just delay this move and trust the Lord to
make this really clear and really focus on saving and
(24:15):
paying off this mortgage and letting that Social Security grow. Um,
you know, a hybrid path would be you work a
few more years and pay off the condo and build
and then, you know, build savings and then move debt
free with a stronger position. Uh, you know, or maybe
you rent in Colorado first to test the lifestyle and
the housing before committing to a mortgage. Does that make sense, though?
S7 (24:40):
It it does. I it does.
S8 (24:44):
Yeah. It's a little bit scary.
S7 (24:46):
My, my older son and his wife are financially sound.
And they have said that they would be open to
helping me. That just raises confusion over when I pass.
Who's entitled to what?
S8 (24:59):
Yeah.
S1 (25:00):
Yeah. Well, I wouldn't worry about that. I'm sure what
they want for you is for you to enjoy this
season of your life and be able to, you know,
cover your lifestyle, living expenses and and so forth. And
they're probably less concerned about what you might leave to
them in the future. So I would say, let's just
slow down. Let's make this a matter of prayer. Let's
delay this for for now. let that Social Security grow.
(25:23):
Let's focus on getting the house paid off. And then
let's see if God does. Just doesn't make it clear
what your next move should be. You know, perhaps a
couple of years down the road. In the meantime, if
you've got a little extra income, maybe you go out
and visit, you know, a couple of times a year
or something like that. Uh, thank you for your call today.
I know this is challenging, and there's not an easy
answer here, but hopefully we've given you some things to
(25:45):
think about. Uh. Let's see. Uh, Mark is here today. Mark.
We've been talking about just investing in light of this market.
You know, I think one of the challenges with this
biblical idea of diversification, uh, is that we know that,
you know, King Solomon, uh, talked about it in Ecclesiastes.
We shouldn't put all of our eggs in one basket. But,
(26:07):
you know, I think it can feel like we're limiting
our potential gains, because if we see certain pockets of
the market, you know, are just red hot, why wouldn't
we just start overweighting there? Remind us of why this
is sound even for the most sophisticated investors.
S4 (26:23):
Yeah, no, it's a great, great point, Rob. And really,
when you get down to it, diversification is an act
of humility. So it's it's really the polar opposite of
the overconfidence that comes with the type of investor sentiment
that we have right now. That overconfidence stems in the
(26:43):
idea that the market has been so hot, it's going
to go up forever. And it's kind of this, this
sneaky thing that works its way into our brains, that
we know what's going to happen in the future. And
diversification is the antidote to that. Diversification says we don't
know what the future's going to hold. We're going to
(27:04):
have that humility to recognize that we don't know the
conditions could change. You know, if we knew for sure
what the best performer was going to be in the future,
there would be no no need to diversify, but we
don't know that. And that's why diversification is such an
important discipline. It's true that diversification we wrote in we
(27:27):
ran an article a few years ago, Rob a cover
article in our newsletter. The title was diversification means always
having to say you're sorry and why you should do
it anyway. And the point of that was that diversification
does mean you're going to have things in your portfolio
that are lagging whatever is hot at the moment. Um, now,
(27:50):
it also means you're probably going to be participating with
part of your portfolio in whatever is working well at
the time. But basically, it is that act of humility
that protects us against a market change. It recognizes we
don't know what the future holds. And like you said,
it all stems from that. King Solomon give a portion
(28:13):
to seven or even to eight for you know, not
what disaster might happen on the earth.
S1 (28:20):
Yeah, yeah. No question about it. And that's really well said.
So what then does a solid long term investing plan
actually look like?
S4 (28:29):
Yeah. Well at a basic level, Rob, you know, foundational
it really should start with a person's personal risk tolerance
their specific stage of life. And then we want to
build a long term plan based around those foundational stones.
Now there are a lot of details that can go
(28:49):
into that. But where that really hits, where the rubber
hits the road in terms of that long term plan
and the topic of this excited investor sentiment, this overoptimistic
sentiment that we're seeing in markets right now is that
people often will start with a well-diversified, solid, long term plan.
(29:13):
And then what happens is, as they see, say, for example,
the Nasdaq tech stocks racing ahead this year. And over
the last couple of years they'll look through their portfolio.
And inevitably if it is well diversified, they're going to
be some holdings in that portfolio that just haven't been
keeping up. And so the undisciplined investor is going to
(29:36):
look at that and say, I need to get these
dogs out of here, and they're going to sell those.
They're going to double up on whatever's hot right now.
And you can just see how that is building concentration risk.
And it's really exposing them to whatever is hot right now.
If that market reverses now, they've lost the protective benefit
(30:00):
of the diversification in their portfolio. So what we're really
trying to get to today, Rob, is when you develop
that long term plan and it is well diversified and
well thought out, have the discipline to stick with that
when the market is hot like this. Just like we
would be encouraging you to stick with that long term
(30:20):
plan if the market was going down, going through a
bear market, you don't want to abandon your plan then either.
So you have to be disciplined on both sides when
it's bad and when it's good.
S8 (30:32):
Yeah.
S1 (30:33):
Boy, that's well said. Folks. If you want to learn
more about what we're talking about here today with Marc Biller,
just head to their website, Sound Mind Investing. Check out
the article titled Bull Market great, but don't get carried away.
Marc Biller here. For one more segment, we'll get to
a few more phone calls just around the corner. This
is faith in finance. Live. Stick around. Fresh new all
(31:02):
time highs on the S&P 500. The small cap Russell
today seems like that's just the order of the day.
We're talking about how you should respond and what it
looks like to stay disciplined in your investing despite this
red hot stock market. Mark Biller here today. He's our
good friend. He's executive editor and senior portfolio manager at
Sound Mind Investing. He's a regular contributor here. And Sound
(31:25):
Mind Investing is an underwriter of this program. They have
been for a long time. If you'd like to read
the article we've been talking about, go to SMI at
Sound Mind Investing. Click on the article bull market. Great,
but don't get carried away. While you're there, check out
the SMI newsletter and also their private client group. Let's
head back to the phones. Ronald in Florida has a
(31:47):
question about interest rates. Ronald. Go ahead.
S9 (31:50):
Uh, thank you very much, Rob. Thank you for taking
my call. Uh, I just want to know the federal
the federal government is going to cut interest rates, and
they're going to cut it a lot. The first time
they're going to cut it is down to 4.1%, down
from 4.3. And then what they want to do is
(32:11):
they want to cut it for 3 or 4 more
times before the end of the year. What's going to
happen with the stock market on that and what else
is going to happen?
S1 (32:21):
Yeah, Mark, it sounds like Ronald has the inside track here. Uh,
what do you think?
S4 (32:26):
Yeah. So great questions Ronald. So, you know, generally speaking
there are two paths that markets follow when the fed
starts cutting rates. And really which of those two paths
we go on depends primarily on whether the economy stays
healthy or whether it goes into recession. Oftentimes the fed
(32:48):
will cut interest rates when the economy is in a recession.
And in those cases, typically those rate cuts do not
help investors. The markets tend to continue to fall despite
the rate cuts if the economy is in a recession.
When I was saying earlier on the program that it
doesn't seem like the economy me, um, is in danger
(33:10):
of going in a recession. And as a result, we
kind of have this Goldilocks environment with a relatively healthy
economy and these rate cuts. Well, in the past when
we've had that combination, it's been very good for the market. Now,
the only caution I would offer here, Ronald, is, of course,
we never know what the future holds, but we don't
(33:31):
have to go back all that far to actually see
what this can look like. Almost exactly a year ago,
the fed cut 50 basis points as opposed to yesterday's
25 basis point cut. And the expectation at that time
was there were going to be more rate cuts on
the heels of that first cut as well. Well, it
(33:54):
didn't turn out that way. And the reason for that
was the economy, which had been looking kind of weak,
which was the, uh, the justification for that 50 basis
point cut. Right. Almost right away we started getting stronger
economic data. And so the fed said, well, with this
stronger economic data, there really isn't much of a rationale
(34:16):
to continue to cut rates further. And I don't think
that that is a completely, um, unlikely scenario. The other
factor of course is inflation. So if either we start
getting really strong economic data stronger than expected in the
next month or two, or we start getting stronger than expected,
(34:39):
higher than expected inflation data, that can really quickly change
the plans around these future rate cuts. So all of
that to say, Ronald, I think you're thinking about this
correctly and trying to line up the the cues to
figure out what's the most likely to happen, but it
(35:00):
is kind of uncertain. Even though the fed may be
planning more rate cuts That's whether or not they get
the data to actually support them, making those additional rate cuts.
We're just going to have to wait and see. And
that's why part of being a good investor is continuing
to tune in and adjust as the facts on the
(35:22):
ground change.
S1 (35:23):
Yeah, yeah, that's well said Ronald. Is that helpful?
S9 (35:27):
Yes it is. Thank you very, very much Rob.
S1 (35:29):
All right. God bless you, my friend to Minnesota. Brian,
thanks for your call. Go ahead.
S10 (35:35):
Hey Rob, appreciate the show. I had a quick question
for you. I invested most of my income into real estate.
I and I don't have a very big 401 K.
Would it make sense to do a reverse mortgage and
take that payment and put it in a 401 K,
or just I owe about 100,000 on a $800,000 home?
S8 (35:56):
Yeah.
S1 (35:57):
And are you are you planning on staying there well
into retirement. Is that the plan at least?
S10 (36:01):
Well, I plan on it. We just bought a lake
home there. We got a real good price on and
it gets the grandkids home. Um, and I'm still working.
I'll probably work till I'm, you know, 67, maybe 70.
I feel good.
S8 (36:17):
Yeah. Got it.
S1 (36:18):
So a couple of years. And what do you have
other than the home that's worth, you know, 900 grand?
What else do you have in the way of assets?
S10 (36:25):
I have 401 K with about 30,000.
S8 (36:29):
Okay.
S1 (36:30):
Yeah. And and do you have quite a bit now, like,
are you able to just sock money away in that
401 K apart from doing, you know, this reverse mortgage
you're suggesting.
S8 (36:39):
I'm.
S10 (36:40):
Putting 10% in right now.
S8 (36:42):
Okay.
S1 (36:43):
Could you do what would it take for you to
do more?
S10 (36:46):
Uh, I could probably do more.
S8 (36:49):
Yeah. Okay.
S10 (36:51):
So you think that'd be better? Just keep paying down.
S8 (36:54):
Yeah. I mean.
S1 (36:54):
I don't like the idea of you pulling the equity
out just to apply it, plow it back into the market,
especially at these rates. I'd rather you just continue to
work on being debt free. I think the question is,
how do you solve for your income needs in the
next season of life beyond your working life? And, you know,
a lot of that's going to come down to, well,
if you're if you're debt free and including, you know,
(37:16):
both properties, that's great. But I suspect that house, you know,
has quite a bit in the way of property taxes
and insurance. And if you don't have a whole lot,
you know, in a 401 K and you're only talking
about working another couple of years, um, you know, and
you're putting 10% of your pay in, you know, you're
not going to have a whole lot there. So the
question would just be, what then, you know, are you
(37:38):
able to build your spending plan around Social Security alone?
Is there some other income source that I'm not factoring
in there? Um, you know, and at that point, could
a reverse mortgage be an option? It could. I mean,
it is a planning tool. It's not my first choice.
But for some people that don't have a whole lot
saved in that season of life, and they want to
(38:00):
stay in their home and continue to own it, but
they want to start systematically pulling it out, either in
the form of a line of credit for, you know,
extra things along the way or as an income stream.
I mean, I would do that, you know, before, you know,
you might do something else. I mean, the other option
is you sell it and you downsize and you sell
(38:21):
the properties, buy something, you know, much smaller, and then
you take the difference and, you know, you invest it
and try to generate an income off of it, but
it's all going to be taxable. Um, so the reverse mortgage,
I think the reverse mortgages of today are not like
the ones of 20 years ago. I mean, you still
own the property. The FHA is guaranteeing it. Um, but,
(38:42):
you know, there is the 2% fee when you do it.
There's the half a percent a year plus that variable
interest rate. So whatever you take out, whether it's a
line of credit or a monthly income stream, even though
it's not taxable, it is going to eventually, you know,
it's going to keep growing over time. Now, when you
die or sell that property, just like with a forward mortgage.
(39:02):
The proceeds of the sale would pay it off and
then everything else would be available. So for some people,
it is the difference between them being able to fund
retirement and enjoy that fourth quarter and not. And that's
where I think it's at least one planning tool to consider.
S10 (39:19):
All right. Thanks, Rob.
S8 (39:21):
Okay.
S1 (39:22):
We appreciate your call today. 800 525 7000. Let's finish
up in Chicago. Sandra. Go ahead.
S11 (39:31):
Hi. I was, um, wanting to know how the, um,
Social Security works with me being a widow with my, um,
previous my my deceased husband's social security. And if I
decide to marry again, I know that I'm entitled to
(39:53):
collecting a portion of his at my full retirement at 67,
which is in three years. Yes, but if I do
decide to get married, do I forego that altogether?
S1 (40:05):
Yeah, it's a great question. And a surviving spouse can
receive the widow's benefits or widowers benefits as early as
age 60. The amount is based on your deceased spouse
work record. If you remarry before the age of 60, uh,
you generally lose eligibility for those widow's benefits. If you
(40:26):
remarry at 60 or later, uh, then you keep the
benefit and you can later switch to your own retirement benefit, uh,
or a spousal benefit for your new spouse if it's higher.
So you could take the survivor's benefits if you're eligible,
and then later if you determine wait based on my
(40:47):
own work record or a spousal benefit on my new
spouse's benefit, I can switch to that. So sometimes it
makes sense to take the widow's benefit, the survivor's benefit first, um, uh,
or the widow's benefit in your case and then switch
to your own at 70 if it's larger. Um, but
the key is your age, uh, as to whether or
(41:08):
not you lose your, um, your previous spouse's benefit.
S11 (41:13):
Okay. Well, I'm currently 64, and I also know that
if I start taking his, um, benefits now, I have to,
because I'm still working full time, that I can. Only
I would have to cut my salary in half. So
I wasn't going to touch any of his Social Security
until 67. And like you said, my plan was to
(41:38):
just wait and then start mine at 70. And that
was before I got this proposal. But it sounds to
me like even if I got the proposal and I
want to move forward and get married again, I have
gone past the age where The benefits are no longer.
(41:58):
I'm no longer entitled to the benefits. I can still
collect those benefits.
S8 (42:02):
That is.
S1 (42:02):
Correct. Your past age 60. You're fully eligible to receive
widow's benefits. Uh, if you haven't already claimed. And it's
going to depend on your age. When you start at
your full retirement age, which is likely 67, you'd get 100%
of your late spouse's benefit. And then if you keep working,
the earnings test does apply. If you're under full retirement age,
(42:24):
which is what you were talking about there. So you
can only earn up to 22,320. Beyond that, a dollar
of every $2 you earn above it would be withheld. Now,
once you reach full retirement age, there's no earnings limit
and you'll eventually get that back, but it would be
reduced in the meantime. I hope that helps. Sandra, thanks
for your call, Mark. Thanks for being with us my friend.
S12 (42:44):
Always a pleasure. Rob.
S1 (42:46):
Sound mind investing is the place to go. Faith and
finance lives of partnership between Moody Radio and Faith fi.
See you tomorrow.
When markets soar, investors face a subtle but dangerous temptation,
trading wisdom for excitement. Hi, I'm Rob West with headlines
touting record highs and optimism running wild. It's easy to
get swept up in the momentum, but is now the
time to double down or to take a step back
and exercise caution? Today, Mark Behler joins us to unpack
(00:30):
the dangers of investing with emotion instead of wisdom. Then
it's on to your calls at 800 525 7000. This
is faith in finance. Live. Biblical wisdom for your financial decisions. Well,
it's always a pleasure to welcome Mark Behler, executive editor
and senior portfolio manager at Sound Mind Investing. A long
(00:52):
time and proud underwriter of this program. Mark, great to
have you back.
S2 (00:55):
Thanks, Rob. Always a pleasure to be with you.
S1 (00:58):
Mark. The markets have made a strong comeback, no doubt
since spring, and many investors are feeling optimistic about even
the year ahead. So how would you describe the mood
right now?
S2 (01:10):
Yeah, Rob, I mean, investors mood has shifted from really
intense fear back in early April to optimism and arguably
even excessive optimism at this point. That can be a
danger sign, because just like fear often leads to bad
decisions during bear markets, when investors get excessively optimistic, that
(01:33):
can lead to bad decisions during bull markets. You know,
the danger is that people allow their emotions to override
their sound judgment and in our context, their long term
investing plans.
S1 (01:47):
Yeah. No doubt. I'll certainly second that. Now, you note
in your article in the latest SMI newsletter, it's called
Bull Market. Great. But don't get carried away that we've
been here before. So what lessons, Mark, should we remember
from the past?
S2 (02:02):
Yeah, well, we've seen episodes of excessive optimism before. You know,
the the classic example was in the late 1990s during
the.com bubble. You know, the euphoria back then was contagious,
but eventually the bubble burst and that wiped out huge
amounts of wealth. So while the hot new technology of
(02:23):
that era, which was the internet, did go on to
fulfill its promise and it did change the world, a
lot of those early companies ended up failing, and even
those that survived ended up losing 80 to 90% of
their value over the next few years. Investors who threw
caution to the wind in the late 90s ended up
(02:45):
paying a pretty steep price over the early years of
the 2000.
S1 (02:50):
Yeah, and we certainly don't want to repeat that. So
how should we approach the current market optimism? Is there
a healthy way to keep it in check?
S2 (02:57):
Yeah there is. And first of all, I should be
clear that it's worth pointing out that long term optimism
by investors is normally rewarded. You know, if you look
back over history and all the wars and depressions, recessions
and bear markets, despite all of that, stocks have trended
upward for more than a century. So we're not arguing
(03:19):
against long term optimism and being a stock market investor.
It's more the short term acute excessive optimism that can
be dangerous because it tends to lead to overconfidence. And
then the assumption that markets are going to keep rising
without interruption. And that's just never been the case. You
know pullbacks in bear markets are part of the deal
(03:41):
as an investor. So the big mistake Rob that many
investors make is they project the current market environment indefinitely
into the future. So since October of 2023. Less than
two years ago, the stock market is up about 60%. Now,
historically speaking, that's about six years of normal gains that
(04:05):
we've packed into a period of less than two years.
So if investors start expecting those types of gains to continue,
or worse yet, they start shifting into even more aggressive
investments that have performed really, really well lately. Well, that's
when people often get hurt.
S1 (04:25):
Yeah, no doubt about it. And do you see people, uh,
you know, trying to time the market in situations like
this because they have so much upside already baked in
that just even with a hint of a correction, they're
trying to go to cash or something like that. I mean,
is that more prevalent in an environment like this?
S2 (04:43):
You know, I actually tend to see more of the opposite. Rob.
It's it's that because everything has worked so well, any
kind of pullback automatically is a dip that we need
to double down even more. We need to buy every dip.
And then the other big mistake is if you have
a well-diversified portfolio, undoubtedly you're going to have some things
(05:05):
that aren't performing as well. And when the market has
done so well, people start chucking those investments overboard and
doubling down on the really aggressive stuff that's been posting
the big returns lately.
S1 (05:18):
Mark Miller here today we're talking markets back with more
after this stick around.
S3 (05:34):
The opinions offered during this program represent the personal or
professional opinions of the participants, given for informational purposes only.
Any information provided is not intended to replace advice from
a financial, medical, legal or other professional who understands your
specific situation.
S1 (05:58):
Great to have you with us today on Faith and
finance live. Mark Biller here today we're talking about these
markets which have just been red hot. And that continues today.
The Dow Jones closing up a quarter of a point.
The S&P 500 up another half a point by the
way S&P small cap Russell both at fresh all time highs.
(06:18):
We've got the Nasdaq up 1% today I mean Mark
we've just got some real momentum here. What is your
take on whether or not this continues from here. And
I don't want to fuel the fire for our conversation today,
but I'm just curious.
S4 (06:33):
Sure. Yeah. That small cap Russell 2000 all time high
is a really significant one. Rob. You know, whereas the
large companies in the S&P 500 and the Nasdaq index,
this is like their 26th high of this year. Wow.
The small caps. They have not been participating nearly to
(06:54):
the degree that the large companies have. In fact, today
was the first new high for the Russell 2000 since
November of 2021, almost four years ago. So this whole time,
small caps have been fighting to get back to that
2021 high, and they finally closed above it today for
(07:15):
the first time. So what that tells me, Rob, is
it's really exactly what we'd expect following rate cuts. You know,
the start of a new rate cutting cycle, which happened yesterday.
What it tells me is that we're getting broader participation.
Investors are starting to feel comfortable moving away from just
(07:37):
those highest quality, largest US market leaders. You know, the
Fang stocks, the Magnificent Seven, um, those those big names
that everybody knows and are starting to broaden out into
small caps and other stocks. Um, like you said, it's
not we're not trying to fuel the fire today, but
(07:59):
I think it's a great counterweight to what we are
talking about with with the excitement, the overconfidence, perhaps the
high sentiment among investors. We're kind of just bringing some
cautions today. But on the flip side of that, we're
absolutely not saying because we're at all time highs, you
(08:20):
need to sell, you need to raise cash, you need
to head for the bunker. That's not the message today.
Because really, with the economy looking pretty healthy and the
Federal Reserve starting to cut rates, uh, expecting that this
is the first of multiple rate cuts to come. You know,
there's a really strong case to be made for kind
(08:42):
of a Goldilocks environment. And there's really no specific reason,
no imminent reason, to expect that the market is going
to do poorly or roll over from here. Of course,
nobody knows what the future holds. That's part of the
point of today's program and our discussion. But I do
want I like that you asked that because I want
(09:04):
people to hear the balance here. We're saying continue to
follow your plan, continue to apply the principles that you
hopefully put in place for your investments when markets were calm,
and don't get carried away and ditch those principles in
the chase for the hot stuff. But at the same time,
(09:26):
that's not the same thing as saying this is a
scary market. You need to be careful, that kind of stuff,
because that's really not the case. It's a good market.
It's arguably a Goldilocks environment for investing. Um, so, you know,
stick with that plan and enjoy the gains because they
don't always come this easily.
S1 (09:45):
Yeah, that's exactly right. That's very well said, Mark. By
the way, if you want to read this article we've
been talking about today, just head to Sound Mind investing.org.
It's titled Bull Market. Great, but don't get carried away.
It has some really sound sage advice for you in
a market like this. Again, sound mind investing. We are
taking your questions as well. Today we want to prioritize
(10:07):
those questions on your investment portfolio, the economy, the markets.
Maybe you're wondering, is this the time to start investing?
Or maybe I've been on the sideline. How do I
move in? Maybe you're transitioning into another stage of life,
perhaps into retirement, wanting to know what's the right investment
mix for you? Mark Miller here today taking those questions
at 800 525 7000. We've got some lines open at
(10:31):
the moment. Uh, but go ahead and call right now
800 525 7000. Let's go out to Clearwater, Florida. Steve.
Go ahead.
S5 (10:40):
Yes. Hey, Rob. Hey. How are you doing?
S1 (10:42):
I'm doing great. Thanks for your call, sir.
S5 (10:46):
Oh, great. Hey, I just wanted to check with you because, um,
I'm 60 years old, and I had. I have some
bene IRAs that are invested with Raymond James and Lincoln Financial,
and it's it's it's pretty, pretty good sum of money. And, um,
I'm still working right now, but I was just wanting
(11:07):
to get your opinion if if, um, I went to
a sales presentation for, uh, a life annuities. And, um,
before I make the decision whether I want to go
into annuities, I was thinking about maybe putting 250,000 into
an annuity. That'll leave me about 750 left in the
(11:27):
stock market. I was wondering, um, what your opinion is
on that? And you said, like, 6 to 8, um,
a fixed annuity. Uh, would that be something that would
be beneficial to me to kind of, um, you know,
have that security that I don't lose at all or
I don't have a big downturn in the stock market.
S1 (11:46):
Yeah, Mark, we get a lot of these questions as
you well know. What are your thoughts? How do you
think about annuities in light of just regular stock market investing?
S4 (11:55):
Yeah, it's a great question, Steve. One thing that I
do like about the way you've asked the question is
you're asking about taking a portion of your investments and
and doing an annuity with that. Um, I like the
idea a whole lot better when someone's talking about a
relatively small portion. Um, because the main appeal of the
(12:18):
annuity is that downside protection. And what you give up
in order to gain that security is typically the prospect
of earning higher returns, um, which, you know, are probably
probably reasonable to expect you would earn higher returns if
you were investing that money outside of the annuity. Um,
(12:40):
at least if you're investing it well. And of course
annuities are typically going to carry higher expenses higher all
in costs. So those are some downsides to consider. Um,
a lot of it does come down to the personal
preference of how afraid somebody is that they're they're going
to lose a lot of money in a market downturn. Um,
(13:03):
there are some some newer products that actually, um, kind
of offer a similar kind of, um. Pro and con
as the annuity. The buffered ETFs are often the referred
to that way where they can limit the downside, but
they don't lock up your money the way annuities do.
(13:26):
That's another big downside of committing to an annuity is
usually your money is locked up for a long period
of time, uh, with surrender fees and so forth. So, um,
I don't love annuities, Steve. Um, but if you're going
to do it, I do like the idea of doing
it with a smaller portion of the portfolio. Leaving most
(13:47):
of the portfolio for traditional investing.
S1 (13:50):
Yeah, I think that's well said. And Steve, hopefully that
gives you some good insight there. Mark's right on. You
know the pros are guaranteed income principle protection perhaps some
tax deferral. The downside is complexity fees liquidity limits and
opportunity cost. What are you giving up on the upside
that could be managed through a properly diversified portfolio. So
(14:13):
at the end of the day, I think you're right
on in that if you do go ahead with it,
just a small portion is probably the right approach. Thanks
for your call. More of your questions for Mark Miller
today right after this break. Stay with us. Mark Miller
(14:35):
here today on Faith and Finance Live I'm Rob West.
We're talking about this bull market that once again has
hit new all time highs today on both the S&P
500 and the small cap Russell following the fed rate
cut of 25 basis points. We're prioritizing your calls today
on anything related to the markets and the economy. We'll
(14:56):
talk to Ron in Atlanta here in just a moment
Ellen in Chicago we've got room for more questions. If
you have a question for Mark Miller today, call right
now 800 525 7000. Um, Mark, what about the financial
media and the role that it can play and just
our exuberance related to these markets? How should we think
(15:17):
about that?
S4 (15:18):
Yeah, it's important, Rob, to understand that with the expansion
of financial media to these channels that are now 24
over seven market news, you just have to understand that
they have to fill a lot of airtime with market stuff.
Even if there isn't necessarily really important market stuff to
(15:41):
be talking about. And what that means is there, they're
always going to thrive on the current hype, if that's
good hype. Like right now. Beautiful. If it's bad hype
when the markets are falling, that's fine with them. They
just want to keep your attention. And so that dynamic
really actively fosters the fear of missing out. And that's
(16:04):
the prevalent thing right now that tends to nudge people
into taking on more and more risk after markets have
already produced these big gains that we've been talking about.
So if I'm listening to that kind of content on
a regular basis, and I'm constantly hearing stories about people
who've struck it rich in this or that investment, or,
(16:28):
on the other hand, predictions of how far this market
might run, whatever the next big thing is. um, that's
that's going to influence me, but not necessarily for the better.
It's not going to make me a better investor in
most cases. And really, that kind of noise, um, usually
distracts people from their long term goals. Their long term
(16:51):
plans kind of moves them off the mark of what
they ought to be focused on for their personal investing.
S1 (17:00):
Yeah, that makes a lot of sense. And I think
something we need to just really be on our guard against.
And perhaps if you're finding yourself anxious or it's leading
you kind of a ways away from your rules based,
time tested approach, perhaps turn down the noise of this world,
turn up God's voice, and remind yourself of who your
source truly is, because that financial media can do a
(17:21):
number on you if you're not careful. All right, let's
grab a few phone calls here while Mark Biller is
here today, we've got some lines open at 800 525
7000 to Atlanta, Georgia. Ron go ahead.
S6 (17:33):
Yes, I am 66 years old and plan on deferring, uh,
Social Security until age 70. My wife is ten years
younger than me, and I'm trying to figure out when's
going to be the best time for her to start, uh,
Social Security when she gets 50% of what? What my income, uh, generates.
(17:55):
My question is this. If she gets Social Security at
age 62, does she get half of what I'm going
to get? What I will get at 70? Or does
she get half of what I would have gotten had
I started Social Security at age 62?
S1 (18:12):
Yeah, it gets kind of complicated, but it's not either
of those, actually. Ron. Uh, so what happens is, uh,
her benefit or the spousal benefit is its starting point
is your full retirement age benefit. And the most she
can get is 50% of your full retirement age benefit.
but that assumes that she waits until her full retirement age.
(18:35):
So if she takes it at 62 again, we're going
to start at 50% of your full retirement age benefit,
not your age 70 benefit. And then we're going to
back it down based on the fact she's taking it
early and it's a permanent reduction. So for example, at
62 she's often going to get 32 to 35% of
(18:57):
your full retirement age benefit instead of 50%. But here's
the other kicker. You have to start taking your benefit
first before she can claim spousal benefits. You know, I
like to say you got to walk through your door
before she can walk through it. And so if you're
waiting until age 70, she wouldn't be able to turn
(19:19):
it on until you start taking it. And when she does,
it's going to be based on a max of 50%
of your full retirement age benefit. And then it's going
to start walking back permanently as a reduction based on
the number of years she takes it early.
S6 (19:37):
Okay. To answer my question.
S1 (19:39):
Okay, good. Thanks for your call. We appreciate it. Uh,
Chicago is where Ellen's located. Go ahead.
S7 (19:46):
Hi. Thank you for taking my call. Um, I am
also 66, like your previous caller, and I was planning
on working and not drawing Social Security until I reach 70. Um,
my kids and my. I live in Chicago, but my
kids moved out to Colorado and got married and started families.
(20:09):
So I'm expecting my fourth grandchild, um, in October, and
they would like me to move out there. I, I
didn't up until now because my mom was still alive,
but she passed about a year ago and, um. No,
it's all right. I would like to move there, but
(20:30):
financially I have not really planned for retirement, so I
have about $100,000 in a 401 K. I have about
$110,000 that my mother left me. I I'm in a
condo where I owe about $20,000, and I could probably
(20:53):
sell it for 1.35 in the current market. And the
problem is, it just all feels, um, the housing market
is much more expensive in Colorado. And ideally, I would
prefer to be in a tiny house with a yard
because I grow food. But it's just I'd be walking
(21:16):
into a 15 year mortgage. I'd be walking away from
a job. Do you have to go on break?
S1 (21:22):
I do, yeah. You know that sound? Well, this is
really helpful. And I'm so sorry to hear about your
mom's passing, and I understand your desire to wanting to
be near your kids and your grandkids and just trying
to make it all work financially. Let's do this. Um,
I'll get, uh, kind of the rest of the details
here during the break. And when we come back, uh,
I'll give you my thoughts right on the other side. So, Ellen,
(21:44):
you stay right there, and, uh, we will pick it
up here in just a moment. Folks. This is faith
in finance live. Mark Biller, our guest today, taking your
questions at 800 525 7000. We'll be right back. Thanks
for joining us today on Faith and Finance Live. We're
(22:06):
talking about this red hot stock market and making sure
that we don't violate those principles. We know to be true,
that are time tested, that find their roots in God's Word, namely, uh,
diversification and a long time horizon. Mark Biller is here today.
We're taking your calls and questions as well. By the way,
if you have an investing related question, we'd love to
(22:26):
get a few of those in today. Anything related to
your portfolio? The market's call right now while Mark's here.
800 525 7000. That's 800 525 7000. Uh, before the break,
we were talking to Ellen in Chicago. Uh, Ellen is 66.
She's still working. Her plan was to delay Social Security
until 70, where she could get about 4000 a month.
(22:49):
She's got 100,000 in A41K, 110,000 from a recent inheritance,
a condo worth about 135,000 with a small mortgage. She's
considering moving to Colorado to be closer to her kids
and grandkids. Her concern, though, is a higher cost of living.
More housing costs, possible pay cut. Um, and, you know,
would love to have a single family home, perhaps even
(23:11):
a small, tiny home where she could grow food, live simply. Uh,
she likes to garden. And, you know, the challenges are
that potential higher cost of living, a smaller income, a
new mortgage in her late 60s with modest retirement savings
and the main income source being Social Security wants a
small pension, runs out, and she's no longer working, and
(23:33):
she doesn't like the idea of taking on debt. So,
you know, I think here, Ellen, first of all, make
this a matter of prayer. Ask God to give you
wisdom and just make it abundantly clear what you're to do.
If you stay in Chicago until 70, the pro is
you keep your current salary, you pay off the condo,
you save more, and you have the delayed retirement withdrawals,
which gets that income up, that retirement income. The downside
(23:55):
is you're away from the kids and grandkids longer if
you move to Colorado now. Yes, you're closer to family,
but you've got those higher costs, a possible pay cut,
and we don't want that mortgage to be a strain
on your future cash flow. So perhaps I would say,
let's just delay this move and trust the Lord to
make this really clear and really focus on saving and
(24:15):
paying off this mortgage and letting that Social Security grow. Um,
you know, a hybrid path would be you work a
few more years and pay off the condo and build
and then, you know, build savings and then move debt
free with a stronger position. Uh, you know, or maybe
you rent in Colorado first to test the lifestyle and
the housing before committing to a mortgage. Does that make sense, though?
S7 (24:40):
It it does. I it does.
S8 (24:44):
Yeah. It's a little bit scary.
S7 (24:46):
My, my older son and his wife are financially sound.
And they have said that they would be open to
helping me. That just raises confusion over when I pass.
Who's entitled to what?
S8 (24:59):
Yeah.
S1 (25:00):
Yeah. Well, I wouldn't worry about that. I'm sure what
they want for you is for you to enjoy this
season of your life and be able to, you know,
cover your lifestyle, living expenses and and so forth. And
they're probably less concerned about what you might leave to
them in the future. So I would say, let's just
slow down. Let's make this a matter of prayer. Let's
delay this for for now. let that Social Security grow.
(25:23):
Let's focus on getting the house paid off. And then
let's see if God does. Just doesn't make it clear
what your next move should be. You know, perhaps a
couple of years down the road. In the meantime, if
you've got a little extra income, maybe you go out
and visit, you know, a couple of times a year
or something like that. Uh, thank you for your call today.
I know this is challenging, and there's not an easy
answer here, but hopefully we've given you some things to
(25:45):
think about. Uh. Let's see. Uh, Mark is here today. Mark.
We've been talking about just investing in light of this market.
You know, I think one of the challenges with this
biblical idea of diversification, uh, is that we know that,
you know, King Solomon, uh, talked about it in Ecclesiastes.
We shouldn't put all of our eggs in one basket. But,
(26:07):
you know, I think it can feel like we're limiting
our potential gains, because if we see certain pockets of
the market, you know, are just red hot, why wouldn't
we just start overweighting there? Remind us of why this
is sound even for the most sophisticated investors.
S4 (26:23):
Yeah, no, it's a great, great point, Rob. And really,
when you get down to it, diversification is an act
of humility. So it's it's really the polar opposite of
the overconfidence that comes with the type of investor sentiment
that we have right now. That overconfidence stems in the
(26:43):
idea that the market has been so hot, it's going
to go up forever. And it's kind of this, this
sneaky thing that works its way into our brains, that
we know what's going to happen in the future. And
diversification is the antidote to that. Diversification says we don't
know what the future's going to hold. We're going to
(27:04):
have that humility to recognize that we don't know the
conditions could change. You know, if we knew for sure
what the best performer was going to be in the future,
there would be no no need to diversify, but we
don't know that. And that's why diversification is such an
important discipline. It's true that diversification we wrote in we
(27:27):
ran an article a few years ago, Rob a cover
article in our newsletter. The title was diversification means always
having to say you're sorry and why you should do
it anyway. And the point of that was that diversification
does mean you're going to have things in your portfolio
that are lagging whatever is hot at the moment. Um, now,
(27:50):
it also means you're probably going to be participating with
part of your portfolio in whatever is working well at
the time. But basically, it is that act of humility
that protects us against a market change. It recognizes we
don't know what the future holds. And like you said,
it all stems from that. King Solomon give a portion
(28:13):
to seven or even to eight for you know, not
what disaster might happen on the earth.
S1 (28:20):
Yeah, yeah. No question about it. And that's really well said.
So what then does a solid long term investing plan
actually look like?
S4 (28:29):
Yeah. Well at a basic level, Rob, you know, foundational
it really should start with a person's personal risk tolerance
their specific stage of life. And then we want to
build a long term plan based around those foundational stones.
Now there are a lot of details that can go
(28:49):
into that. But where that really hits, where the rubber
hits the road in terms of that long term plan
and the topic of this excited investor sentiment, this overoptimistic
sentiment that we're seeing in markets right now is that
people often will start with a well-diversified, solid, long term plan.
(29:13):
And then what happens is, as they see, say, for example,
the Nasdaq tech stocks racing ahead this year. And over
the last couple of years they'll look through their portfolio.
And inevitably if it is well diversified, they're going to
be some holdings in that portfolio that just haven't been
keeping up. And so the undisciplined investor is going to
(29:36):
look at that and say, I need to get these
dogs out of here, and they're going to sell those.
They're going to double up on whatever's hot right now.
And you can just see how that is building concentration risk.
And it's really exposing them to whatever is hot right now.
If that market reverses now, they've lost the protective benefit
(30:00):
of the diversification in their portfolio. So what we're really
trying to get to today, Rob, is when you develop
that long term plan and it is well diversified and
well thought out, have the discipline to stick with that
when the market is hot like this. Just like we
would be encouraging you to stick with that long term
(30:20):
plan if the market was going down, going through a
bear market, you don't want to abandon your plan then either.
So you have to be disciplined on both sides when
it's bad and when it's good.
S8 (30:32):
Yeah.
S1 (30:33):
Boy, that's well said. Folks. If you want to learn
more about what we're talking about here today with Marc Biller,
just head to their website, Sound Mind Investing. Check out
the article titled Bull Market great, but don't get carried away.
Marc Biller here. For one more segment, we'll get to
a few more phone calls just around the corner. This
is faith in finance. Live. Stick around. Fresh new all
(31:02):
time highs on the S&P 500. The small cap Russell
today seems like that's just the order of the day.
We're talking about how you should respond and what it
looks like to stay disciplined in your investing despite this
red hot stock market. Mark Biller here today. He's our
good friend. He's executive editor and senior portfolio manager at
Sound Mind Investing. He's a regular contributor here. And Sound
(31:25):
Mind Investing is an underwriter of this program. They have
been for a long time. If you'd like to read
the article we've been talking about, go to SMI at
Sound Mind Investing. Click on the article bull market. Great,
but don't get carried away. While you're there, check out
the SMI newsletter and also their private client group. Let's
head back to the phones. Ronald in Florida has a
(31:47):
question about interest rates. Ronald. Go ahead.
S9 (31:50):
Uh, thank you very much, Rob. Thank you for taking
my call. Uh, I just want to know the federal
the federal government is going to cut interest rates, and
they're going to cut it a lot. The first time
they're going to cut it is down to 4.1%, down
from 4.3. And then what they want to do is
(32:11):
they want to cut it for 3 or 4 more
times before the end of the year. What's going to
happen with the stock market on that and what else
is going to happen?
S1 (32:21):
Yeah, Mark, it sounds like Ronald has the inside track here. Uh,
what do you think?
S4 (32:26):
Yeah. So great questions Ronald. So, you know, generally speaking
there are two paths that markets follow when the fed
starts cutting rates. And really which of those two paths
we go on depends primarily on whether the economy stays
healthy or whether it goes into recession. Oftentimes the fed
(32:48):
will cut interest rates when the economy is in a recession.
And in those cases, typically those rate cuts do not
help investors. The markets tend to continue to fall despite
the rate cuts if the economy is in a recession.
When I was saying earlier on the program that it
doesn't seem like the economy me, um, is in danger
(33:10):
of going in a recession. And as a result, we
kind of have this Goldilocks environment with a relatively healthy
economy and these rate cuts. Well, in the past when
we've had that combination, it's been very good for the market. Now,
the only caution I would offer here, Ronald, is, of course,
we never know what the future holds, but we don't
(33:31):
have to go back all that far to actually see
what this can look like. Almost exactly a year ago,
the fed cut 50 basis points as opposed to yesterday's
25 basis point cut. And the expectation at that time
was there were going to be more rate cuts on
the heels of that first cut as well. Well, it
(33:54):
didn't turn out that way. And the reason for that
was the economy, which had been looking kind of weak,
which was the, uh, the justification for that 50 basis
point cut. Right. Almost right away we started getting stronger
economic data. And so the fed said, well, with this
stronger economic data, there really isn't much of a rationale
(34:16):
to continue to cut rates further. And I don't think
that that is a completely, um, unlikely scenario. The other
factor of course is inflation. So if either we start
getting really strong economic data stronger than expected in the
next month or two, or we start getting stronger than expected,
(34:39):
higher than expected inflation data, that can really quickly change
the plans around these future rate cuts. So all of
that to say, Ronald, I think you're thinking about this
correctly and trying to line up the the cues to
figure out what's the most likely to happen, but it
(35:00):
is kind of uncertain. Even though the fed may be
planning more rate cuts That's whether or not they get
the data to actually support them, making those additional rate cuts.
We're just going to have to wait and see. And
that's why part of being a good investor is continuing
to tune in and adjust as the facts on the
(35:22):
ground change.
S1 (35:23):
Yeah, yeah, that's well said Ronald. Is that helpful?
S9 (35:27):
Yes it is. Thank you very, very much Rob.
S1 (35:29):
All right. God bless you, my friend to Minnesota. Brian,
thanks for your call. Go ahead.
S10 (35:35):
Hey Rob, appreciate the show. I had a quick question
for you. I invested most of my income into real estate.
I and I don't have a very big 401 K.
Would it make sense to do a reverse mortgage and
take that payment and put it in a 401 K,
or just I owe about 100,000 on a $800,000 home?
S8 (35:56):
Yeah.
S1 (35:57):
And are you are you planning on staying there well
into retirement. Is that the plan at least?
S10 (36:01):
Well, I plan on it. We just bought a lake
home there. We got a real good price on and
it gets the grandkids home. Um, and I'm still working.
I'll probably work till I'm, you know, 67, maybe 70.
I feel good.
S8 (36:17):
Yeah. Got it.
S1 (36:18):
So a couple of years. And what do you have
other than the home that's worth, you know, 900 grand?
What else do you have in the way of assets?
S10 (36:25):
I have 401 K with about 30,000.
S8 (36:29):
Okay.
S1 (36:30):
Yeah. And and do you have quite a bit now, like,
are you able to just sock money away in that
401 K apart from doing, you know, this reverse mortgage
you're suggesting.
S8 (36:39):
I'm.
S10 (36:40):
Putting 10% in right now.
S8 (36:42):
Okay.
S1 (36:43):
Could you do what would it take for you to
do more?
S10 (36:46):
Uh, I could probably do more.
S8 (36:49):
Yeah. Okay.
S10 (36:51):
So you think that'd be better? Just keep paying down.
S8 (36:54):
Yeah. I mean.
S1 (36:54):
I don't like the idea of you pulling the equity
out just to apply it, plow it back into the market,
especially at these rates. I'd rather you just continue to
work on being debt free. I think the question is,
how do you solve for your income needs in the
next season of life beyond your working life? And, you know,
a lot of that's going to come down to, well,
if you're if you're debt free and including, you know,
(37:16):
both properties, that's great. But I suspect that house, you know,
has quite a bit in the way of property taxes
and insurance. And if you don't have a whole lot,
you know, in a 401 K and you're only talking
about working another couple of years, um, you know, and
you're putting 10% of your pay in, you know, you're
not going to have a whole lot there. So the
question would just be, what then, you know, are you
(37:38):
able to build your spending plan around Social Security alone?
Is there some other income source that I'm not factoring
in there? Um, you know, and at that point, could
a reverse mortgage be an option? It could. I mean,
it is a planning tool. It's not my first choice.
But for some people that don't have a whole lot
saved in that season of life, and they want to
(38:00):
stay in their home and continue to own it, but
they want to start systematically pulling it out, either in
the form of a line of credit for, you know,
extra things along the way or as an income stream.
I mean, I would do that, you know, before, you know,
you might do something else. I mean, the other option
is you sell it and you downsize and you sell
(38:21):
the properties, buy something, you know, much smaller, and then
you take the difference and, you know, you invest it
and try to generate an income off of it, but
it's all going to be taxable. Um, so the reverse mortgage,
I think the reverse mortgages of today are not like
the ones of 20 years ago. I mean, you still
own the property. The FHA is guaranteeing it. Um, but,
(38:42):
you know, there is the 2% fee when you do it.
There's the half a percent a year plus that variable
interest rate. So whatever you take out, whether it's a
line of credit or a monthly income stream, even though
it's not taxable, it is going to eventually, you know,
it's going to keep growing over time. Now, when you
die or sell that property, just like with a forward mortgage.
(39:02):
The proceeds of the sale would pay it off and
then everything else would be available. So for some people,
it is the difference between them being able to fund
retirement and enjoy that fourth quarter and not. And that's
where I think it's at least one planning tool to consider.
S10 (39:19):
All right. Thanks, Rob.
S8 (39:21):
Okay.
S1 (39:22):
We appreciate your call today. 800 525 7000. Let's finish
up in Chicago. Sandra. Go ahead.
S11 (39:31):
Hi. I was, um, wanting to know how the, um,
Social Security works with me being a widow with my, um,
previous my my deceased husband's social security. And if I
decide to marry again, I know that I'm entitled to
(39:53):
collecting a portion of his at my full retirement at 67,
which is in three years. Yes, but if I do
decide to get married, do I forego that altogether?
S1 (40:05):
Yeah, it's a great question. And a surviving spouse can
receive the widow's benefits or widowers benefits as early as
age 60. The amount is based on your deceased spouse
work record. If you remarry before the age of 60, uh,
you generally lose eligibility for those widow's benefits. If you
(40:26):
remarry at 60 or later, uh, then you keep the
benefit and you can later switch to your own retirement benefit, uh,
or a spousal benefit for your new spouse if it's higher.
So you could take the survivor's benefits if you're eligible,
and then later if you determine wait based on my
(40:47):
own work record or a spousal benefit on my new
spouse's benefit, I can switch to that. So sometimes it
makes sense to take the widow's benefit, the survivor's benefit first, um, uh,
or the widow's benefit in your case and then switch
to your own at 70 if it's larger. Um, but
the key is your age, uh, as to whether or
(41:08):
not you lose your, um, your previous spouse's benefit.
S11 (41:13):
Okay. Well, I'm currently 64, and I also know that
if I start taking his, um, benefits now, I have to,
because I'm still working full time, that I can. Only
I would have to cut my salary in half. So
I wasn't going to touch any of his Social Security
until 67. And like you said, my plan was to
(41:38):
just wait and then start mine at 70. And that
was before I got this proposal. But it sounds to
me like even if I got the proposal and I
want to move forward and get married again, I have
gone past the age where The benefits are no longer.
(41:58):
I'm no longer entitled to the benefits. I can still
collect those benefits.
S8 (42:02):
That is.
S1 (42:02):
Correct. Your past age 60. You're fully eligible to receive
widow's benefits. Uh, if you haven't already claimed. And it's
going to depend on your age. When you start at
your full retirement age, which is likely 67, you'd get 100%
of your late spouse's benefit. And then if you keep working,
the earnings test does apply. If you're under full retirement age,
(42:24):
which is what you were talking about there. So you
can only earn up to 22,320. Beyond that, a dollar
of every $2 you earn above it would be withheld. Now,
once you reach full retirement age, there's no earnings limit
and you'll eventually get that back, but it would be
reduced in the meantime. I hope that helps. Sandra, thanks
for your call, Mark. Thanks for being with us my friend.
S12 (42:44):
Always a pleasure. Rob.
S1 (42:46):
Sound mind investing is the place to go. Faith and
finance lives of partnership between Moody Radio and Faith fi.
See you tomorrow.
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