__Last month's FDIC takeover of unstable Silicon Valley Bank, and the subsequent shutdowns/shoring up of other banks, have made bank depositors wary.__

In recent articles, Mark and Matt have addressed depositor concerns, [explaining what transpired](https://soundmindinvesting.com/articles/what-to-make-of-the-recent-banking-crisis) with the troubled banks and why, even if other banks were to fail, [most bank depositors aren't in danger](https://soundmindinvesting.com/articles/is-your-money-safe) of losing money.

But what about *brokerage firms*? Could follow-on effects from the forces troubling the banking industry put brokerage businesses at risk? It's a natural question to ask. When destabilizing things start to happen in the financial world, everyone gets nervous!

However, it's important to remember that the business model of a bank and the business model of a brokerage firm differ.

#### Banks and brokers

__• The banking model:__ Banks take deposits and, in turn, use those deposits to make loans. Banks earn money on the loans and pay some of those earnings to depositors as interest. (Interest is somewhat like a "rental" fee paid to depositors for the use of their money.)

When too many depositors demand their money back immediately, a bank can find itself in an "illiquid" situation. The bank may not be able to meet depositor demand.

__• The brokerage model:__ Investors determine how their money will be deployed, and brokerage firms implement those choices. Typically, clients purchase investments such as stocks or mutual funds.

If many customers suddenly opt to sell their holdings and close their accounts, the brokerage firm wouldn't suffer a liquidity crisis. The broker would sell underlying investments, and the proceeds would be returned to the clients.

The liquidating investors would get their money back, and the financial health of the broker wouldn't be affected directly. (However, a decline in a broker's customer base would affect future earnings due to a loss of client fees.)

It's also worth pointing out that securities regulations prohibit brokerages from mingling investor funds with a firm's operating capital and accounts. Therefore, by law, the money returned to investors must come from investor accounts (and their underlying holdings), not from the brokerage firm's financial resources.

#### Schwab's two hats

One thing that's made some people wary about how banking-industry problems might affect brokerage firms is that [Charles Schwab operates both kinds of businesses](https://www.google.com/search?q=“The+initial+Schwab+concern+had+to+do+with+the+amount+of+deposits+invested+during+a+low+interest+rate+period+and+thus+held+at+a+loss+currently.%22&ei=7kksZMDONMyB0PEPgOGF8AQ&ved=0ahUKEwjA_YPZzJD-AhXMADQIHYBwAU4Q4dUDCBA&uact=5&oq=“The+initial+Schwab+concern+had+to+do+with+the+amount+of+deposits+invested+during+a+low+interest+rate+period+and+thus+held+at+a+loss+currently.%22&gs_lcp=Cgxnd3Mtd2l6LXNlcnAQAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwA0oECEEYAFC2DliGGWDVG2gBcAF4AIABAIgBAJIBAJgBAKABAqABAcgBCMABAQ&sclient=gws-wiz-serp) (a paywalled *New York Times* article that's free via Google). As you probably know, Schwab is one of SMI's recommended brokers, but there is also a [Charles Schwab Bank](https://www.schwab.com/bank) — the 10th-largest bank in the U.S.

Although Schwab's two businesses are separate, they are closely connected. Schwab (the broker) deposits the cash held in investors' sweep accounts with Schwab (the banker). And while that money remains in sweep accounts, it is FDIC-insured because Charles Schwab Bank is an FDIC-insured institution.

Of course, sweep accounts aren't intended to be long-term investment options. They're temporary holding places for cash that'll be deployed elsewhere in short order. Most savvy investors keep relatively little money in sweep accounts on an extended basis, especially since sweep accounts pay very little compared to money-market funds.

Indeed, with Schwab's own money funds (from Schwab, the broker) paying more than 4%, investors have been moving cash from their sweep accounts and into better-yielding Schwab MMFs.

"Clients aren't moving bank deposits out of Schwab," noted Schwab CEO Walt Bettinger in [an interview](https://www.wsj.com/articles/charles-schwab-says-it-could-ride-out-a-deposit-flight-a8b2a626?st=osz7cla0jvluxjp&reflink=desktopwebshare_permalink) with *The Wall Street Journal*. "All they're doing is realigning their investments, as they should."

#### What if a brokerage firm *did* run into trouble?

To protect investors in the unlikely event that a brokerage firm was to fail, Congress created the Securities Investor Protection Corporation (SIPC) in 1970. Any brokerage firm registered with the Securities and Exchange Commission must be a member.

SIPC insurance protects the "custody function" of a brokerage firm. It doesn't protect investors from investment losses from market downturns or interest rate changes — otherwise, the SIPC would be very busy!

From the SIPC website:

> SIPC protection is not the same as protection for your cash at [an FDIC-insured] banking institution because SIPC does not protect the value of any security.... Instead, in a liquidation, SIPC replaces missing stocks and other securities when it is possible to do so.

In other words, if any assets were missing because of a brokerage failure, the SPIC would attempt to restore those assets — deploying up to $500,000 per investor account to rebuild portfolios. The SIPC insurance limit for uninvested cash holdings is $250,000, but money-market funds — which are mutual funds invested in "cash" assets — are protected under the $500,000 limit.

To further assuage investor concerns about safety, many brokerage firms carry "excess of SIPC" coverage from other insurers.

Fidelity, an SMI-recommended broker, has additional coverage through Lloyd's of London, with no per-customer dollar limit on coverage of securities. Uninvested cash is covered up to $1.9 million. "This is the maximum excess of SIPC protection currently available in the brokerage industry," [according to Fidelity](https://www.fidelity.com/why-fidelity/safeguarding-your-accounts).

Schwab, too, offers "excess" coverage in the event SIPC protections are exhausted. "The combined total of our SIPC coverage and our 'excess SIPC' coverage means Schwab provides protection up to a combined return of $149.5 million per customer, up to $1.15 million of which may be in cash," [says the Schwab website](https://www.schwab.com/legal/account-protection). (TD Ameritrade, which Schwab owns, has [even more robust protections](https://www.tdameritrade.com/account-protection.html) in place.)

E-Trade offers "excess of SIPC" coverage via Morgan Stanley (which owns E-Trade). [According to the Morgan Stanley site](https://www.morganstanley.com/terms), "Excess Coverage provides additional protection up to the full net equity value of each account, including unlimited coverage for uninvested cash."

Vanguard, too, offers additional protection. The company's current ["Brokerage Account Agreement"](https://www.vanguard.com/pdf/vbsaac_042016.pdf) document (PDF) provides sparse details, however, saying only that "Vanguard Brokerage maintains additional coverage through an insurer that supplements SIPC coverage."

#### Acting as matchmaker

In addition to its role as an insurer, the Securities Investor Protection Corporation stands ready to serve another crucial role: matchmaker. If a brokerage firm was at risk of failing, the SIPC would try to find another firm willing to take on the failing business's clients — similar to how the FDIC tries to find a healthy bank to assume the accounts of customers of a failed bank.

If the SIPC failed to find a match — and if investor assets had been compromised — only then would the SIPC's insurance function come into play. If that insurance proved insufficient for some clients, the "excess" coverage from other insurers would kick in.

#### A high level of protection

So, is your brokerage account safe? Yes, to the highest degree possible. It is protected by regulations that segregate brokerage accounts from investor accounts. It is further protected by SIPC insurance and other SIPC functions. And finally, it is covered by supplemental insurance running well into the millions of dollars.

Although it is theoretically possible that all of those backstops and protections could fail, the risk is so remote that it is not worth losing sleep over.

*[Image](https://soundmindinvesting.com/img/asset/Y2xvdWQvcmlzay1hc3Nlc3NtZW50LTUyNTAyMTQ3MS5qcGc=?fit=crop-6-95-1&w=1660&h=896&s=e0cc359dd68cd98b82e18be71cabf9a8) used with permission. *

Since 1990, do-it-yourself Christian investors have relied on SMI for proven strategies and trustworthy guidance.

Sound Mind Investing

Investing

Last month's FDIC takeover of unstable Silicon Valley Bank have made bank depositors wary.

"Is my brokerage account safe?"

__The stock market barely missed a beat after the tragedy of 9/11. In an industry with so little time for reflection, we must learn to pause and ask the important questions.__

All of us, the entire sixth floor of brokers, stood with muted headsets dangling from our necks as we clustered around televisions hanging from the ceiling. Normally, ticker tape scrolled 24/7 across the bottom of the screens as talking heads breathlessly spelled triumph or gloom depending on the energy of the hour. But now the screens filled with scenes of black smoke billowing from the Twin Towers and images of planes crashing into the Pentagon and into a field in Pennsylvania.

It was eerie—in that vast space usually humming with the cacophony of so many voices and so much frenetic energy—to have everything be stone cold still. All the money in the world, all the power in the world, was impotent in that moment, even if only for a flash. Reports detailed how Cantor Fitzgerald, a financial services firm, lost virtually its entire New York workforce, 658 dead. These were people like us, working in a building like us, doing a job like us. That morning they went to work just as we had, but they would never be going home.

> All the money in the world, all the power in the world, was impotent in that moment, even if only for a flash.


In the years previous, the dot.com boom had led to wild speculation and people treating the stock market like a slot machine. Technology stocks had been on a five-year scorcher, but, in a Wall Street-style Chernobyl, it culminated in a cataclysmic meltdown. The Nasdaq index dropped 77%. A slew of companies went belly up. Unemployment skyrocketed. Things were dire. And then terrorists struck, and everything about our future and economy and way of life felt threatened. On that terrible day, we couldn’t have imagined the recovery that was coming. Soon the phones would go mad again. That feverish ticker tape would scroll again with new highs. The talking heads would soon be punch drunk with how the good times were back.

The Fed responded to the shock of 9/11 by doubling down on lower interest rates in an attempt to stimulate the economy, while shoppers responded to the odd patriotic call to defy the terrorists with consumeristic abandon: *spend! spend! spend!* The money engines revved with new fury. Capital poured into the markets. Only a year previous, my firm had (for the first time ever) laid-off employees, but now they couldn’t hire brokers fast enough. Management cajoled us into working overtime. One afternoon an American Express Travelers Cheque arrived in my mailbox, a crisp gold bill that was my employer’s way of saying: *Thank you for enduring the insanity…please don’t leave.*

I learned that markets and economies have little interest in deliberative discernment. Few paused to wonder whether all that we’d endured as a nation—all our hubris and our greed, all that we’d suffered through the terrorist attack and the financial collapse—had anything to teach us. Who had time for reflection when it was boomtime again?

> I learned that markets and economies have little interest in deliberative discernment. Few paused to wonder whether all that we’d endured as a nation—all our hubris and our greed, all that we’d suffered through the terrorist attack and the financial collapse—had anything to teach us.


Sometimes the most important questions are the ones we never ask.

So, with no time for discerning reflection, the market surged. Amid this frothy environment, IPOs (*initial public offerings*, where a company sells its shares for the first time) were exploding, and I joined our firm’s new IPO team. With the technology boom reigniting new frenzy, a few IPOs’ stock prices skyrocketed, filling headlines with sensational stories of overnight billionaires. The gold rush was on. Investors rushed after the next quick profit, often without any basic understanding of the company they were investing in, or the risks involved. Folks were stepping up to the slot machine again.



> The gold rush was on. Investors rushed after the next quick profit, often without any basic understanding of the company they were investing in, or the risks involved.


As I began to learn the world of IPOs, I saw afresh the underbelly I’d discovered when first interviewing for a broker job. With lots of firms, their only driving concern was to move the IPO shares they’d been allotted. They had a product to sell, and they wanted to sell it—whether or not it was a wise investment for their customer. Eventually, regulators insisted brokers assess customers’ awareness of what they were getting into, but this process was often merely perfunctory.

This wasn’t our approach. My manager drilled into us how much care we needed to take in explaining what an IPO was and how perilous the whole process could be. We’d slowly walk clients through the litany of questions: *Did they understand how the IPO could go down just as easily as up? Were they investing money they were willing to lose? Did they understand the investments they were making?* I was proud of our ethical commitments, our forthrightness and attempts to ensure no one was taken advantage of. But this wasn’t how things worked everywhere.

And yet, in the years since, it’s become obvious that what was needed here was more than only ethics and honest dealing. Remembering our diligence in all those conversations with clients, all those methodical queries, I’m struck yet again by how easy it is to never ask some of the most important questions. Our exchanges—in every broker interaction, not only with IPOs—centered around profit or loss, around risk and portfolio suitability—but we never asked anything more fundamental. *How does this company’s business or product align with your faith? Do you actually want to be an owner of this company—do you want to use your resources to contribute to their work in the world? How will your investment in this company contribute (or not) to the common good—and does that matter to you? How is the nobility of work and the goodness of creation being sustained, or harmed, with your investment?*

> Our exchanges—in every broker interaction, not only with IPOs—centered around profit or loss, around risk and portfolio suitability—but we never asked anything more fundamental.


While we wouldn’t expect a broker to pose each of these questions to a client at every turn, the fact is that these vital questions never even occurred to me. They weren’t part of the larger vision. Was *anyone* having these conversations? Was anyone considering what responsibility we’re taking on whenever we become a partial owner of some enterprise? Was anyone thinking through the immense privilege of using our dollars to do more than prepare for retirement, to actually do good in the world?

__With any investment, we’re foolish if we don’t consider the basic concerns familiar to every investor: risk, market volatility, return on equity, etc. However, wisdom invites us to give diligent attention to far deeper questions, to the many core questions that prevailing investing philosophies rarely stop to ask.__

__[Read](https://www.faithfi.com/eventide-center-for-faith-investing/a-stockbrokers-tale-part-1-worthy-of-trust-5474)__ Part 1 of this series.

__[Image](https://www.faithandinvesting.com/journal/questions-we-never-ask/)__ used with permission.

__DISCLOSURE__
This communication is provided for informational purposes only and was made possible with the financial support of Eventide Asset Management, LLC (“Eventide”), a registered investment adviser. Eventide Center for Faith and Investing is an educational initiative of Eventide. Information contained herein has been obtained from third-party sources believed to be reliable.

Inspiring an authentically Christian practice of modern investing.

Eventide Center for Faith & Investing

Articles

Winn Collier shares about his time working as a stockbroker in this two-part series.

A Stockbroker’s Tale, Part 2: The Questions We Never Ask

__Today's workers and retirees are feeling far less confident than last year that they will have enough money to live comfortably throughout retirement. That’s the lead finding from The Employee Benefit Research Institute’s (EBRI) 33rd annual Retirement Confidence Survey. Some 64% of respondents reported feeling somewhat or very confident about their retirement funding — down sharply from last year’s 73%. That's the biggest hit to retirement confidence since the Great Financial Crisis of 2008.__

Not surprisingly, the biggest concern weighing on people’s minds is inflation, with 84% of today’s workers and 67% of retirees saying the increased cost of living is making it more difficult to save money. Large numbers from both groups say inflation is causing them to make substantial cuts to their spending.

As for their actual preparedness, 44% of workers age 55 or older have less than $250,000 saved for retirement.

#### The weight of debt

Debt is another issue weighing on people's minds. Some 62% of workers say debt is a problem for them (up from 56% last year). Those figures are much lower for retirees, with 34% saying debt is a problem for them (about the same as last year).

While the survey didn’t break debt down into specific types, other surveys have pointed to an increase in the number of people bringing a mortgage into their later years. As we have recommended before, it’s wise to plan to retire your mortgage by the time you retire. And if you plan to refinance, be careful about resetting the 30-year payoff clock to a date that’s past your intended retirement age.

One other area of vulnerability: Just 44% of today's workers have planned for how they would cover an emergency or big expense in retirement.

#### A little knowledge could go a long way

Several questions on the survey highlighted where an investment in financial education could be very beneficial. For example, while target-date funds (TDFs) have become the default investment choice in many workplace retirement plans, 40% of this year’s survey respondents said they do not understand how such funds work.

As [we’ve written before](https://soundmindinvesting.com/articles/dont-be-surprised-if-target-date-funds-miss-the-mark), different companies that offer target-date funds design their funds with different asset allocations — even for funds that carry the same target retirement date. Such funds are only becoming more complex with the introduction of TDFs that have annuities baked into their design.

Many survey respondents acknowledged not knowing where to go for financial or retirement planning advice. Asked where they do go for such counsel, the most popular answer, at 40%, was family or friends.

Similar to past surveys, just 51% of today’s workers have taken the time to estimate how much money they are likely to need to have saved by the time they retire.

#### A consistent story

As has been true in the past, the latest EBRI Retirement Confidence survey shows a couple of important areas of disconnect between today’s workers and today’s retirees. For example, whereas 73% of today’s workers believe they will work for pay to some degree in retirement (up from 70% last year), only 30% of today’s retirees have actually done so.

While some 68% of workers expect to retire at age 65 or later, only 32% of today’s retirees waited that long. More specifically, 33% of today’s workers expect to retire at age 70 or never, whereas that was true for just 6% of today’s retirees.

Importantly, 46% of today’s retirees said they left the workforce earlier than planned, often for reasons that were outside of their control, such as health issues for themselves or a loved one or a company downsizing.

One takeaway? Use retirement planning software, such as [MoneyGuide](https://soundmindinvesting.com/articles/a-new-better-process-for-getting-started-with-moneyguidepro), to run some numbers on your retirement. And when you do, base your calculations on a retirement age that’s a bit younger than your true intended retirement age. Having a well-thought-out plan will do wonders for your retirement preparedness and peace of mind.

To read more about the survey results, [click here](https://www.ebri.org/retirement/retirement-confidence-survey).

*[Image](https://soundmindinvesting.com/img/asset/Y2xvdWQvYXJ0aWNsZXMvaXN0b2NrLTEyNTMyNzI4NzguanBn?fit=crop-4-49-1&w=1660&h=896&s=f17cdb93c6af0ca55454de2de82dac48) used with permission.*

Retirement

Today's workers & retirees are feeling far less confident than last year that they will have enough money later in life.

Tough Economic Conditions Bring Big Drop in Retirement Confidence

__It may seem like a strange assertion that now is a good time to start investing in stocks. After all, the stock market is in a bear market, inflation remains stubbornly high, the Fed seems intent on raising interest rates further, and a recession is widely anticipated.__

Taken together, these factors paint a somewhat scary picture for anyone thinking about getting started with investing or adding to their investment accounts.

Nonetheless, now *is* a good time to start investing in stocks — or to continue investing if you’re using an automated plan such as a 401(k). The reason has nothing to do with current market conditions or an expectation of what the market will do next. Rather, it’s because the primary obstacle new investors typically need to overcome is *inertia*. Simply getting started — and establishing the habits and structures to keep investing — is the most important issue.

This is true even if the initial timing turns out to be less than ideal. Some folks delay because they’re waiting for “just the right time.” The truth is that *anytime* is a good time for the long-term investor, and the sooner the better.

#### Launching into a storm

But what if you get started just before a major sell-off? It’s true that your opening investment will take a bit of a hit, but your subsequent monthly investments will be gobbling up more and more shares as prices fall. If you won’t be withdrawing your money for a decade or two, you should *want* bear markets to come along. That’s when stocks temporarily “go on sale” and you get more shares with your monthly purchases.

To illustrate this, consider the example of a young husband and wife who started investing one year before the most savage bear market of the past 90 years was about to begin. Most people would consider this to be about the worst time possible to start investing, which is why we’re using it as an example.

We’ll assume our young couple had saved up $3,000 in an IRA and committed to adding $300 a month going forward. They didn’t know then what we know now — that the bursting of the housing bubble and the Great Recession lay straight ahead and stocks would be lower five years later than they were at the time. Specifically, the benchmark S&P 500 stock index, which ended October 2006 at 1,378 would close out October 2011 at 1,253, down about 9% for the entire five-year period (having fallen as low as 666 in March 2009!).


![](https://soundmindinvesting.com/assets/articles/l2-slow-steady-wins-race.png)


Pity that young couple for taking our advice, right? Not at all.

The table on the right shows the theoretical results from their dollar-cost-averaging approach (where the same dollar amount is invested every month regardless of market conditions), assuming their money was invested using SMI’s Upgrading strategy.

Month after month, they invested their $300 regardless of what the headlines and “experts” were saying. As the table shows, the market treated them well for the first 12 months. Then the bottom fell out. After two years, they had invested a total of $10,200 and their account value was only $7,333, meaning they were more than $2,800 in the red. Obviously, that’s not what they had hoped for. But they persevered.

Due to the large number of shares they were buying each month at discount prices, they were well positioned when the market rebounded over the following years. Five years later, at the end of October 2011, *although the S&P 500 index was still lower than when they began their investing*, they were back in the black. On total investments of $21,000, they had a $2,077 gain.

#### The bigger risk

This example illustrates how dollar-cost-averaging helps reduce the damage from falling markets. By holding the dollar amount of your monthly investment constant, *you buy more shares when prices move lower and fewer shares as prices move higher*. In effect, you are buying more at bargain prices and relatively little at what might be considered high prices. This should help you see that even a poorly timed beginning can still turn out well. The bigger risk is that you never get started at all. (See, *[Going Steady: The Advantages of a Systematic Investment Plan](https://soundmindinvesting.com/articles/going-steady-the-advantages-of-a-systematic-investment-plan1).*)

It’s worth noting that Fund Upgrading used to operate a bit differently during bear markets than it does today. In our example, all new money was invested in stock funds right away. Today, Fund Upgrading has defensive protocols that [shift some of its investments to cash](https://soundmindinvesting.com/strategies/fund-upgrading#recommendations) during bear markets. This has the potential to diminish the dollar-cost-averaging effect, but should make it even easier emotionally to keep investing every month, as a portion of that investment may stay in cash waiting for the system to signal it’s an opportune time to buy stock funds again. By making your regular monthly contributions throughout the bear market, that money is ready and waiting when the system says, “Go!”

The time to begin a stock-oriented investing strategy is as soon as your foundation is laid — i.e., you’re [free of consumer debt](https://soundmindinvesting.com/articles/the-7-essential-steps-to-leaving-debt-behind) and have [a contingency fund](https://soundmindinvesting.com/articles/setting-an-emergency-savings-target) to help protect you from the uncertainties of life. Your investing decisions should be based on where *you* are now, and where *you* need to go.

So, if your foundation is in place and it’s time to begin investing your monthly surplus, then now’s a good time *for you*.

*[Image](https://soundmindinvesting.com/img/asset/Y2xvdWQvbDItd2h5LW5vdy1iZWdpbi1pbnZlc3RpbmcuanBn?fit=crop-79-57-1.1&w=1660&h=896&s=9fc2adbebe901c4fb3ce31b46b668a0e) used with permission.*

*[Image](https://soundmindinvesting.com/assets/articles/l2-slow-steady-wins-race.png) used with permission.*

**

It may seem like a strange assertion that now is a good time to start investing in stocks.

Why Now Is a Good Time to Begin Investing in the Stock Market

For more than a quarter century, financial advisors have used the 4% rule for retirement withdrawals. So why change it now? Some advisors are now saying 4% may be too high, while the man who wrote the rule says it’s too low. In today's Faith and Finance Rob West weighs into the debate. This is Faith and Finance -  biblical wisdom for your financial decisions.
- We’ll start by consulting God’s Word about saving and spending, which lays down a basic principle. Proverbs 21:20 tells us, *“Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it.”*
- We certainly don’t want to be foolish, so choosing the right percentage that we can withdraw from our holdings each year in retirement is important, to say the least. Too little and you may not be able to meet your expenses. Too much, and you run the risk of running out of funds during retirement.
- You might be curious about where the 4% rule came from in the first place. Way back in 1994, investment advisor Bill Bengen published an article that detailed how and why he was recommending to his clients that they only withdraw 4% a year from their assets in retirement.
- Bengen said he created his 4% rule based on a hypothetical investor who retired in October, 1968, and was promptly hit with an extended bear market and high inflation. In other words, a “worst case scenario.”
- And even though you might be tempted to think history is repeating itself now, Bengen believes that by tweaking asset allocation, a retiree would actually be safe withdrawing up to 4.7% annually, as he is doing now. To be fair, he’s suggesting that 4.5% would be safer, until we see what inflation will do in the near future.
- So how did Bengen arrive at the new, 4.7% figure? He says it’s due to the greater gains he’s seen by adding small and microcap asset classes to his portfolio. He says that increased volatility, but also gains, which made his 4.7% calculation possible.
- Besides the benefit of increasing the rate of withdrawal in retirement, the new rule also allows the retiree to reduce allocation in stocks over bonds. The old 4% rule was based on a 50 to 70% stock allocation, which could make many retirees jittery.
- The new higher withdrawal rate of 4.7% over the long haul is based on an ideal stock allocation of only 55 to 60%.
- Bengen says having less than that in equities will lower your return enough enough to make 4.7% unworkable, but having more than that will create enough volatility to also threaten your safe withdrawal rate.
- But not all investing experts are as optimistic as Bengen. In fact, Morningstar is now suggesting that the old 4% rule is too high a withdrawal rate for the times. They’re recommending that figure be reduced to just 3.3%.
- Remember that the goal is to have enough built up to last for a 30-year retirement, say from age 65 to 95. Market returns and inflation will no doubt fluctuate a great deal over that time, but in the end, they should balance out.
- And whether you use 3.3, 4, or 4.7% as your safe withdrawal rate in retirement, they all assume that percentage of your portfolio will be enough to live on when Social Security is added to the mix.
- Anyone contemplating an earlier retirement will need a great deal more in assets or a lower withdrawal rate, or both. That certainly won’t be easy.
- Some investment advisors suggest that maximum diversification is one way to overcome the uncertainties of bear markets and inflation. That means not just having a broad spectrum of stocks and bonds, but also having several different “buckets” of retirement holdings.
- Some might be in a 401k or traditional IRA with their tax-deferred benefit. Some could also be in a Roth IRA, that’s funded with after tax money but allows for tax-free withdrawals. Some equity holdings could be income-producing, some dividend-paying.
- Some fixed income securities could be I bonds, which are taxable; others could be municipal bonds which aren’t subject to federal tax. Some “munis” even escape state taxes, as long as you live in the state that issued the bonds.
- This can all get pretty confusing. There's a case for having an experienced financial advisor help you with your retirement investing, whether you’re already retired or you're still working. We believe strongly in the Certified Kingdom Advisor designation. With a CKA, you’ll not only have an experienced advisor, but one who shares your Christian values. You can find a local CKA professional, by going to faithfi.com and click the [Find a CKA](https://www.faithfi.com/find) at the top of the page.
Next, Rob answers these questions at __800-525-7000__ or via email at [askrob@FaithFi.com](mailto:askrob@faithfi.com?subject=Faith%20and%20Finance%20Listener%20Question&%20Finance%20Listener%20Question)
- How can you give up a timeshare that you purchased last year if the sellers are telling you that it can't be sold back to them? (Rob referred the caller to the [Timeshare Users Group](https://tug2.com/Home)).
- What's your best recourse to pay off about $7000 in credit card debt and buy now pay later loans if you are 64, living on a fixed income, and don't want to get further in debt? (Rob referred the caller to [Christian Credit Counselors](https://www.christiancreditcounselors.org/)).
- Would it hurt your credit rating to close a Mastercard you opened last year when you were trying to get out of a timeshare, but never activated the card? (Rob referred the caller to [annualcreditreport.com](https://www.annualcreditreport.com/index.action)).
- What is the purpose of opening a Roth IRA now if you were told by an advisor you should have one waiting to be funded for when you retire in five years?
- How do you report interest paid to you by a home buyer who was initially renting from you?
Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at [FaithFi.com](https://www.faithfi.com/) where you can join the FaithFi Community, and even download the free FaithFi app.

FaithFi

Faith & Finance is a daily radio ministry hosted by Rob West. The program offers a practical, biblical and good-natured approach to managing your time, talents and resources.

Faith & Finance with Rob West

For more than a quarter century, financial advisors have used the 4% rule for retirement withdrawals. So why change it n

4%: A Rule To Be Broken?

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 <a href="https://soundmindinvesting.com/">Sound Mind Investing</a>.
<ul><li>Today we want to look at <a href="https://soundmindinvesting.com/articles">an article</a> 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.</li><li>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. </li><li>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.</li><li>KEY FACTORS</li><li>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. </li><li>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.</li><li>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. </li><li>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.</li><li>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. </li><li>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.</li><li>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.) </li><li>So you want to make full use of tax-advantaged accounts like IRAs and 401(k)s.</li><li>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.</li><li>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.</li><li>So turn off the financial shows on TV and stop looking at your daily returns.</li><li>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.</li><li>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 <a href="https://www.faithfi.com/">FaithFi.com</a>.</li></ul>On this program, Rob also answers listener questions: 
<ul><li>What is the best approach to saving for and purchasing a car? </li><li>How can you get the best possible return on your money with minimal risk? </li></ul>Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at <a href="https://www.faithfi.com/">FaithFi.com </a>where you can join the FaithFi Community, and even download the free FaithFi app.

The late Colin Powell said, “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”  ﻿There are also no secrets to successful investing. In the long run, several key factors will determine your results.

Factors for Successful Investing With Mark Biller

The late Colin Powell once said, “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” 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.
Then it’s your calls at 800-525-7000.

Listen to MoneyWise Live each weekday at 4pm EST on Moody Radio.

MoneyWise Live

When it comes to investing, it helps to think inside-out. Rob West encourages us not to get distracted by “Five Hot Investments You Should Be Looking at Right Now!” Instead focus on what God has called you to and invest accordingly.

The Faith & Finance Minute is a great way to be reminded of God's financial principles with actionable items you can easily apply to your daily life.

Faith & Finance Minute

When it comes to investing, it helps to think inside-out. Rob West encourages us not to get distracted by “Five Hot Investments You Should Be Looking at Right Now!” Instead focus on what God has called you to and invest accordingly.

Investing From the Inside-Out

__Today, many investors view investing as simply trying to profit off “the market.”__

Have we lost the perspective that investing connects us directly to businesses?

Our last video of our Timeless Truths for Investing series explains how recapturing this perspective of investing in businesses may change your approach to investing.

#### Read the Transcript:

__Jason Myhre:__ “Invest in businesses, not markets. I have a conviction that I would say most of us have really lost sight of what investing is all about and the true purpose of investing. We’ve lost this perspective that investing has a connection to business and that we’re actually supplying capital that supports business. Today, I think that many investors really picture investing as trying to profit from the market itself. It’s a very abstract, magical view of the stock market where you kind of put your money in to this financial machine. You try to ride this wave over time. You hope that it spits out a greater dollar amount in the future. Most of us are not really thinking about investing in businesses, supporting businesses, or profiting from a productive and intrinsic activity from businesses.

Why is this a problem? Well, it’s a problem because number one, if your relationship is with the market, that means your confidence is gonna ebb and flow based on the performance of the stock market. So when the stock market’s doing well, you’re gonna feel great. When the stock market’s doing poorly, you’re going to feel down or concerned. But there’s a more profound reason that this is a problem. I want to share with you, this is a quote from William Kavanaugh, who is a professor from DePaul University, who remarks, “retirement accounts tend to just go into mutual funds whereas an investor, not only do I not have any idea how the companies that I have stock in are being operated, I don’t even know what companies I have stock in. And these investments tend to be run by an elite of managers whose one preoccupation is with increasing the bottom-line profit.” 1

Have you ever thought about investing and just wondered, where does the money come from? What am I involved in here? What are the businesses that I own? What are the products and services that I’m investing in and profiting from that are driving these returns? And how well aligned or not aligned are these businesses with my beliefs, convictions, and values? Investing is company ownership. At its most essential, investing involves a supply of capital to support business in exchange for ownership in that business, which is what gives you the rights to receive any of the profits and growth that might come in the future. When you see investing this way, you realize, oh, I’m not profiting from a chart. I’m profiting from specific businesses that are doing real things, having a real impact in the lives of others.”

__References__
1. Mars Hill Audio Journal, Volume 95


*This communication is provided for informational purposes only and expresses views of Eventide Asset Management, LLC (“Eventide”), an investment adviser. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. Eventide’s values-based approach to investing may not produce desired results and could result in underperformance compared with other investments. Any reference to Eventide’s Business 360® approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform Eventide’s overall research process. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results.*

Eventide

Insights

Have we lost the perspective that investing connects us directly to businesses?

Invest in Businesses, Not Markets

Have you ever gotten bad financial advice? What's the foundational basis for receiving sound advice? This brief Nuts and Bolts clip offers biblical recommendations on getting the best advice!

Equipping people worldwide to faithfully apply God’s financial principles so they may know Christ more intimately.

Compass Financial

Videos

Have you ever gotten bad financial advice? What's the foundational basis for receiving sound advice?

Getting the Best Advice! - Nuts and Bolts

What's the best things to know when deciding to get into or out of the financial market according to God's wisdom? Ron Blue shares his experience and perspective.

The Ron Blue Institute seeks to be a thought leader with great influence committed to changing the way Christians think, act, and communicate about financial stewardship, empowering the church, and changing the world.

Ron Blue Institute

What's the best things to know when deciding to get into or out of the financial market according to God's wisdom?

Should I Get Out of the Market Now?

It’s more difficult to spot our destructive behavior than others.

We all know investment advice like “buy low and sell high” and “don’t try to time the market,” but most people don’t recognize when they are doing the opposite.

Have you bought a fund in the last couple of years that was doing well (buying high) and is now ready to sell out since it has recently underperformed (selling low)?

Are you attempting to forecast the market and make drastic changes in your portfolio to take advantage of short-term tailwinds (timing the market)?

In the second video of this series, we remind ourselves of how investor behavior makes a big difference in long-term returns.

Read the Transcript:

Jason Myhre: “Restrain yourself. There’s an incredibly important personal dimension that we all have to reckon with if we’re going to be successful investors, and that is to deal with the enemy within. I want to introduce this to you by showing you an article from the Wall Street Journal.

Every decade there is crowned some new King of mutual funds, and so what we’re looking at in this article is the Coronation ceremony of the King of mutual funds for the 2000s, a fund called CGM Focus.1 You could see it got an impressive 18% annualized return. How do you think the investors in this fund did? Too bad investors weren’t around to enjoy much of those gains. The typical CGM focus shareholder lost 11% per year, for 10 years, according to investment research from Morningstar. This is the very best-performing mutual fund for a decade. The investors in that very fund are somehow managing to lose 11% per year. I mean, conceptually, how is that even possible that you could lose money on such a winning investment? Here’s what’s happening. These investors want to find a good investment, they’re wanting to grow their money, they go out and they find this fund. They say, wow, look at the return on this thing. So they buy it after it’s had a strong run of performance. So they’re buying it when it’s relatively expensive. The fund will experience a downturn. All funds have downturns, but they’ll make a mistake. They’ll hang with it for a while, but eventually, they’ll give up selling at a lower price. So they bought high and sold low. Low and behold, the fund will recover, we’ll put on another impressive streak of performance, and it will attract another set of investors who will buy it at a high, and who will later sell it at a low. This happens over and over and over again, such that on average the fund is doing very well, and on average its investors are doing very poorly.

We love to chase a hot return. We almost always give up when times are hard. If your mind is always wondering when’s the best time to buy and when’s the best time to sell, that is precisely the trigger you need to kind of turn off in your brain. The best mindset to have when you’re investing is how do I sit here, restrain myself, do nothing, and let that long-term performance trend that we saw in history play out in your favor over time.”

Disclosure:

__This communication is provided for informational purposes only and expresses views of Eventide Asset Management, LLC (“Eventide”), an investment adviser. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. Eventide’s values-based approach to investing may not produce desired results and could result in underperformance compared with other investments. Any reference to Eventide’s Business 360® approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform Eventide’s overall research process. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results.__

“buy low and sell high” and “don’t try to time the market,” but people don’t recognize when they are doing the opposite.

"Is my brokerage account safe?"

A Stockbroker’s Tale, Part 2: The Questions We Never Ask

Tough Economic Conditions Bring Big Drop in Retirement Confidence

Why Now Is a Good Time to Begin Investing in the Stock Market

4%: A Rule To Be Broken?

Factors for Successful Investing With Mark Biller

Factors for Successful Investing With Mark Biller

Investing From the Inside-Out

Invest in Businesses, Not Markets

Getting the Best Advice! - Nuts and Bolts

Should I Get Out of the Market Now?

Restrain Yourself