Focus on Consequences, Not Probabilities with Mark Biller | FaithFi
August 20, 2026
Focus on Consequences, Not Probabilities with Mark Biller
Faith & Finance with Rob West
Risk is unavoidable in investing—and in life. But not all risks deserve equal attention.
It is easy to focus primarily on the probability that something will happen. If an investment, career move, or financial strategy has a high likelihood of succeeding, we may assume it is a good decision. But Mark Biller, Executive Editor at Sound Mind Investing, suggests another question may be even more important: If things go wrong, how wrong could they go?
That shift—from focusing on probabilities to considering consequences—can help us make wiser financial decisions and protect ourselves from risks that could permanently derail our plans.
Risk is unavoidable in investing—and in life. But not all risks deserve equal attention.
It is easy to focus primarily on the probability that something will happen. If an investment, career move, or financial strategy has a high likelihood of succeeding, we may assume it is a good decision. But Mark Biller, Executive Editor at Sound Mind Investing, suggests another question may be even more important: If things go wrong, how wrong could they go?
That shift—from focusing on probabilities to considering consequences—can help us make wiser financial decisions and protect ourselves from risks that could permanently derail our plans.
A Small Probability Can Carry a Huge Consequence
Suppose someone told you there was a 99% chance an opportunity would succeed. Those odds sound compelling.
But what if the remaining 1% chance of failure meant complete financial ruin? Suddenly, the decision looks very different.
A simple illustration is crossing a busy street. The probability of being hit by a vehicle may be relatively small, but we still look both ways because the potential consequence is catastrophic. A low probability does not make a severe consequence irrelevant.
The same principle applies to investing. An outcome may be statistically unlikely, but if it could wipe out your savings, destroy your retirement plan, or leave you unable to meet your obligations, it deserves serious consideration.
Financial thinker Peter Bernstein summarized the principle well: the consequences of being wrong can matter more than the probabilities of being right. That leads to two important questions:
If this goes wrong, how wrong could it go?
And how much would it matter?
Why Humility Matters in Investing
Financial history offers plenty of reminders that even highly intelligent investors cannot anticipate every outcome.
One famous example is the collapse of Long-Term Capital Management in 1998. The hedge fund was run by some of the brightest minds in finance and relied on sophisticated mathematical models. Those models worked under most circumstances—but a combination of leverage and extraordinary market conditions caused enormous losses.
The lesson is not that investors should avoid risk altogether. Risk is part of investing.
Rather, wise investors recognize the limits of their knowledge. We cannot predict every market decline, economic shock, or unexpected life event. That reality should lead us toward humility and encourage us to build financial plans with room for error.
Build a Margin of Safety
One practical way to prepare for uncertainty is to maintain a margin of safety.
That begins before investing. A strong financial foundation includes reducing burdensome debt and establishing adequate emergency savings. Then, as you invest, diversification can help reduce the danger of concentrated bets, while avoiding excessive leverage can protect against losses that permanently impair your financial position.
The goal is not to eliminate every possible risk. That would be impossible.
Instead, margin allows your plan to survive when circumstances do not unfold as expected. Biblical wisdom encourages this kind of prudence. Proverbs 22:3 says:
“The prudent sees danger and hides himself, but the simple go on and suffer for it.”
Wise stewardship does not require us to live fearfully. But it does call us to recognize potential danger and prepare appropriately.
Your Emergency Fund Protects More Than Emergencies
An emergency fund may seem separate from an investment portfolio, but the two are closely connected.
Think of investing like climbing a ladder. Before climbing higher, you want to make sure the ladder is resting on firm ground.
Emergency savings provide that foundation.
Unexpected expenses are inevitable. A furnace fails. A vehicle needs replacing sooner than expected. A major repair suddenly becomes necessary.
Without adequate savings, those expenses may force you to sell investments at exactly the wrong time—perhaps when the market is down significantly. What began as an ordinary household expense can then cause lasting damage to a long-term investment plan.
An emergency fund creates financial breathing room so temporary problems do not become permanent setbacks.
Protecting Retirees From Sequence-of-Returns Risk
Consequences become especially important as retirement approaches.
One risk retirees face is known as sequence-of-returns risk. This occurs when significant investment losses happen early in retirement while a retiree is simultaneously withdrawing money from the portfolio.
Two retirees could experience similar average investment returns over several decades but have very different outcomes depending on when the losses occur.
A steep market decline early in retirement can be particularly damaging because withdrawals compound those losses. Even strong returns later may not fully repair the damage.
Diversification can help manage this risk. Some retirees also choose to keep several years of anticipated spending in cash or relatively low-risk investments so they are less likely to sell stocks during a severe market downturn.
The appropriate strategy will vary by household, but the principle remains the same: consider not only what is likely to happen, but what would happen to your plan if difficult circumstances arrived at an inconvenient time.
How Much Risk Can You Afford?
Risk tolerance is often discussed in terms of emotion: How comfortable are you when markets fall?
That matters, but consequence-based thinking adds another dimension.
Ask what would happen if an investment or strategy failed.
Would the loss merely be disappointing? Or would it prevent you from retiring, eliminate your emergency reserves, jeopardize your home, or keep you awake at night?
If a negative outcome would derail your financial goals, you may be taking more risk than you can afford—even if the probability of success appears high.
On the other hand, if you can absorb the downside without seriously damaging your financial plan, then probability can play a larger role in the decision.
This framework also guards against becoming too conservative.
Avoiding stocks entirely in retirement may reduce short-term market volatility, for example, but it introduces another potential consequence: a portfolio may fail to keep pace with inflation over a retirement that lasts several decades.
Wise risk management considers both sides.
Stewardship Leaves Room for the Unexpected
We cannot know exactly what markets, inflation, interest rates, or the economy will do next. And Scripture never promises that careful planning will remove uncertainty from our lives.
Our confidence ultimately rests somewhere deeper.
As Christians, we believe God is sovereign and that our ultimate security is found in Christ—not in the performance of our portfolios. That frees us to approach financial decisions with both wisdom and humility.
We can plan carefully without pretending we know the future. We can prepare for risk without being ruled by fear. And we can leave margin in our finances because we recognize our own limitations.
The goal is not to predict every possible outcome. It is to build a financial life capable of enduring when some of our predictions inevitably prove wrong.
Before taking a significant financial risk, don't simply ask, “What are the odds that this will work?”
Ask one more question: “If it doesn't, can my financial plan withstand the consequences?”
That question may be one of the most valuable safeguards a wise steward can use.
On Today’s Program, Rob Answers Listener Questions:
My son and daughter-in-law have a car loan with a payment over $900 a month and likely a very high interest rate because of poor credit. Are there any options to refinance, reduce the rate, or lower the payment?
I’ll reach full retirement age later this year and plan to keep working. Should I start Social Security then so I can save, invest, and give more, or delay benefits to receive a larger amount later?
Remember, you can call in to ask your questions every weekday at (800) 525-7000. Faith & Finance is also available on Moody Radio Network and American Family Radio. You can also visit FaithFi.com to connect with our online community and partner with us as we help more people live as faithful stewards of God’s resources.
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