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Factors for Successful Investing With Mark Biller

Faith & Finance with Rob West | Jan 24, 2023

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Show Notes

There are also no secrets to successful investing. In the long run, several key factors will determine your results. Mark Biller lays those out for us today on Faith and Finance.

Mark Biller is the executive editor at Sound Mind Investing.

  • Today we want to look at an article you have up at SoundMindInvesting.org titled, “Eight Key Factors That Determine Your Long-Term Investing Results.” We’ll dive into those in a moment. But first, let’s talk about the big-picture message we hope you’ll take away today.
  • In a nutshell, it’s to focus on what you can control rather than worry about what you can’t. That’s good advice for all aspects of life, including money management.
  • For investors, it’s a timely reminder as well, given the ever-present uncertainty about the stock market’s future direction. But regardless of which way the market moves this year, there are still several factors you have direct control over. So those are the things to focus our attention on.
  • KEY FACTORS
  • 1. The rate of return you earn: This is what investors focus most of their attention on, which causes them to spend their time trying to pick winning stocks, the best funds, or the most astute market guru to follow.
  • And it’s not that your rate of return doesn’t matter. It obviously does. It’s just that, unfortunately, this is the one factor we’ll discuss today that’s largely out of your control, unless you’re willing to settle for guaranteed CD-like returns. No matter how hard you study or how much you know, you can’t predetermine exactly what your rate of return will be. So instead, it makes sense to turn your attention to the factors where you do have a lot of control.
  • 2. Building on a strong foundation: This is the first factor that you DO have control over. You don’t have as much to fear from economic storms and bear markets if you’re debt-free, have an emergency reserve, and use a cash flow plan that produces a monthly surplus.
  • Your ability to put such a foundation in place is affected by how big a house you buy, how new a car you drive, how responsibly you handle credit, and a host of other decisions—most of which are under your direct control.
  • 3. How much you save and invest: Invest $200 a month for 20 years at 10.0% and it will grow to $152,000. You could improve that to $198,000 by either (1) increasing your annual rate of return from 10% to 12%, or (2) by increasing your deposit by $60 per month.
  • A lot of investors will try to move heaven and earth to boost that return, while boosting the monthly deposit is much more certain and under their direct control.
  • 3. How much you lose to taxes: The example I just gave assumes you’re investing in a tax-deferred retirement account. If you made your $200 monthly investments into a regular taxable account, you’d need to earn 12.6% per year rather than 10%, just to reach even the lower $152,000 target. (That’s assuming a 29% combined federal/state rate.)
  • So you want to make full use of tax-advantaged accounts like IRAs and 401(k)s.
  • 4. How long you save: Examples of compound interest and investment growth show us that amazing things happen when you leave money invested for long periods of time. That means you should start contributing to your investment accounts as early as possible and plan to leave the money working tax-deferred for as long as possible.
  • 5. Whether you’re playing the short game or the long game: With the long-term investing game, you win by plotting your strategy very carefully at the outset, and then letting that strategy play out over time. Short-term news, current market fads, and so-called expert opinions are largely irrelevant to long-term investors.
  • So turn off the financial shows on TV and stop looking at your daily returns.
  • 6. Whose advice you listen to: Is your strategy in sync with biblically based financial principles, or more reflective of the conventional thinking offered by the secular investing world? It’s your choice.
  • And there we can recommend two sources for biblical financial advice: Obviously at Sound Mind Investing. Also, you can connect with a Certified Kingdom Advisor. You can do that at FaithFi.com.

On this program, Rob also answers listener questions:

  • What is the best approach to saving for and purchasing a car?
  • How can you get the best possible return on your money with minimal risk?

Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can connect with a FaithFi Coach, join the FaithFi Community, and even download the free FaithFi app.

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