Nothing New Under the SunApril 5, 2023
by Ron Bare
Perhaps the most common mistake made when making investment decisions is making ANY investment decision outside the context of a written financial plan based on your goals and values. That is why Bare Wealth Advisors does not create investment portfolios for our clients without a plan.
Without a plan we are left to the news headlines and predictions from all the market “experts” – most of which are fear driven. Fear is a good salesperson, and financial journalism is guilty of “selling” the headline that will generate the most clicks. We believe wealth is ultimately a resource entrusted to us to maximize the impact and calling God has given us. We should never succumb to fear headlines and financial journalism’s goal of making short term investment decisions based on what the market may do over the next few months.
As Ecclesiastes tells us, “nothing is new under the sun.” Over the past year we have seen the following: war, inflation, rising interest rates, recession fears, supply chain constraints, and most recently the failure of Silicon Vally Bank (a tech focused bank which had heavy losses the past year). All this on top of coming out of a closed economy due to the Covid 19 pandemic, can be exhausting and emotional – however, none of these are “new under the sun!” We live in an uncertain world and one benefit of a financial plan is to help you plan for what we call the “certainty of uncertainty”.
Our advice is and always will be the same – think long term, diversify, minimize debt, live generously, live within your means, and create a tailored financial plan based on the individual values, purpose, and goals your family has established. However, in the meantime let me share a few thoughts regarding our current economic state.
There has been much discussion recently regarding the cause of the inflation we have been experiencing. Basic economics tell us that when you create too much of something the value of that something is reduced. The total M2 (money supply – or simply just think money in all bank accounts) increased by 40% during a two-year window of the pandemic. (Over $6 Trillion!) For perspective, the normal increase in M2 is about 6% per year. It does not take a rocket scientist to figure out this may reduce the value of money (the definition of inflation). The good news (of course nobody is focusing on any good news) is that M2 has decreased over the past 12 months and many leading indicators are showing that inflation is subsiding. It will take some time, but inflation is heading in the right direction – lower!
Remember, even though some indicators show inflation is declining, it is always challenging to predict what will happen in the “short-term.” More importantly, short term is not where we or you should focus. We are long term planners focused on the impact your resources can help you make over the next 10, 20 or 30 years!
As I wrap up these thoughts, I would like to encourage us all to make sure we receive the proper “inputs.” Begin with the NEVER changing word of God (Bible), understand the principles of truth and ask for wisdom to apply them to your life. Then surround yourself with advisors that know and care about you, listen to you and share your values, and can help you discern how to apply wisdom to the vision and impact God is calling you and your family to make – in this short life we have been privileged to live. Thank you for allowing us at Bare Wealth Advisors to be one of your trusted advisors, we are honored!