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The Rushmore Report – Should I Invest in the Stock Market?

I am often asked, “Should I invest in the stock market?” The volatility of the recent market makes this a more poignant question now than ever. This is my best advice. Proverbs 4:7 notes, “The beginning of wisdom is this: Get wisdom. Though it cost all you have, get understanding.” Before you decide how and even whether you should be involved to be in the stock market, consider this:

First: Understand your Finances.

Evaluate your own personal balance sheet, which includes your income, your assets, your obligations (your bills) and your debts. Too many of us are uninformed about our true financial picture.

In Proverbs we are advised: “Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.”

You can think of “a crown” as a job, which may end, and the flocks as savings and investment as livestock had value. Even kings need to know what’s in the bank.

Second: Understand the Difference Between Saving and Investing.

After you have established a budget that makes allowance for your obligations, such as tithing, and saving an emergency fund (for those undesirable events that happen to all of us), you will now know what you have available for investing. Your savings account should not be placed at risk. Investment funds are subject to loss but at various degrees of risk. If you cannot afford to lose the funds, they should be moved into a savings program consisting of money market funds, CD’s and/or treasuries.

Initially, we at Crown recommend that you invest about 5 percent of your income. You can learn more about budgeting here. But this is the important part — be prepared to lose it.

One of the realities of any investment is that sometimes it fails. What goes up often comes down.

Over the last few years, the stock market has enjoyed the financial momentum of emerging markets — these are growing economies in a group of countries called BRICS, representing the financial markets of Brazil, Russia, India, China and South Africa. But as you noted in your question, BRICS are in trouble. Brazil is headed into recession. China’s government is engaging in huge market corrections that worry investors about whether it is truly strong, and turmoil in the oil industry is impacting Russia and the Middle East. Of course here at home, we’ve had our own difficulties with job creation and a slow economy.

The bottom line is that when choosing investment or savings; don’t look for a quick profit from a deal too good to be true (it probably is). Choose carefully, and consider getting good financial advice from an advisor who shares your values.

Third: Understand and Practice Diversification.

Over the course of a lifetime of saving and investing, money will grow, but if you will need to retire soon, the stock market may be too volatile short term. Diversification is the only safe strategy for investing, to allow your money — the seed you have to sow — a chance to grow in more than one field, and to protect yourself from the rise and fall of markets.

Ecclesiastes 11:2 is Solomon’s timeless advice on diversification. It is the best hedge against uncertainty. He recommends dividing your “portions” or investment monies between 7 or 8 different opportunities. This equates to no more than 12-15% in a single fund.

Fourth: Understand that you have more options than just the stock market.

If you’re looking for a strategy for growing wealth and assets, consider the Proverbs 31 woman. She engaged in real estate, trading, fashion, working in a number of business ventures available to her. She diversified her investment, and rose early to make them profitable.

Perhaps investing in a local business would work better for you. Typically, investing in your own skills and talents pays the greatest dividends over time.

Fifth: Understand Slow Growth is Good.

All of us need to prepare for the future with wise saving and investing, but don’t be in too much a hurry as that can lead you to unnecessary risk.

“Dishonest money dwindles away, but whoever gathers money little by little makes it grow,” Proverbs 13:11.

About the Author

Chuck Bentley is the CEO of Crown, the largest Christian financial ministry in the world, founded by the late, Larry Burkett. He is an author, host of My MoneyLife- a daily radio feature and a frequent speaker on the topic of Biblical financial principles. Follow him on Twitter @chuckbentley and visit Crown.org for more help.

The Rushmore Report – Rethinking the Rainy Day Fund

On the road to building personal wealth, everyone hits a roadblock sometimes. Whether it’s an unexpected job loss or a surprise medical bill, it’s bound to strike when you least expect it – and often when you’re least prepared for it. That’s when it’s time to tap into your rainy day fund. The classic savings account for a rainy day is designed for those unexpected misfortunes that might otherwise bring you to the precipice of a financial crisis.

American savings habits, however, are no longer what they used to be, and creating this financial shield in a world of shopping online, with overnight delivery, isn’t as easy as it used to be. A recent survey found that 57 million Americans don’t have any savings accounts in place for emergencies (or for that matter, retirement).

There are, however, a few tools that can help you keep this vital account in place when you’re tempted by a new TV or vacation.

First, make sure your rainy day fund is accessible – but not too accessible. Dan Andrews, founder of Well Rounded Success, a personal finance consulting firm based in Fort Collins, CO, says a good way to do that is to have it at a different bank from your day-to-day checking and savings accounts. The account should hold money you can access immediately – not funds tied up in stocks, certificates or deposit or retirement accounts. Good places to stash your funds include high yield savings accounts and money market accounts.

How much should you have in a savings account for this purpose?

“I will stipulate that clients have four to six months of cash in their bank account in addiction to whatever I’m managing,” says Chris White, a certified financial adviser and the author of Working with the Emotional Investor. “That makes it less likely they’ll call for distributions at an inopportune time.”

One way to jump start your rainy day fund: when you receive a cash windfall, whether you got a tax refund or you’ve finally paid off a loan and have extra money on hand each month, funnel that into a high interest savings account until it has reached a sufficient level. Keep that four to six months of expense range in mind. Once you’re beyond that goal, you should consider putting the money into a retirement account, such as an IRA, CD, or Money Market account.

If you’re carrying debt, try to get it paid off as quickly as possible. By eliminating interest payments, you’ll reach your savings goals more quickly. And even as you’re paying down that debt, you should put a small amount into the rainy day fund each week or month at the same time to stay in the habit of contributing.

Finally, if you’ve been looking to kick an expensive habit, like smoking or drinking, establishing a high yield savings account can be a good motivation. The national average price for a pack of cigarettes is $6.16. Putting that money from a pack-a-day habit into a rainy day fund would add up to $2,248 per year.

About the Author

Chris Morris regularly contributes to national outlets including Fortune, CNBC.com, Voice of America, Variety, and Common Sense Media, as well as to dozens of other major publications.

 

The Rushmore Report: Ten Secrets to Great Wealth

If you Google “millionaire” and “secrets,” you get more than 10 million results. I’m a veteran of the technology industry, and have spent decades studying successful leaders. I’m talking about hundreds of men and women who have become wildly successful. These are their secrets. If you want to enjoy great success financially, or otherwise, practice these steps carefully.

1. Quit reading dumb articles like this one.

Think I’m kidding? This is so not funny. None of those hundreds or thousands of successful people I’ve known wasted their time on nonsense like “the secrets of millionaires.” Quit searching for miracle solutions and silver bullets; there aren’t any.

2. Reach beyond your grasp.

Perhaps the most brilliant advice in history is Robert Browning’s famous quote, “A man’s reach should not exceed his grasp.” If you want to be successful, you have to consistently strive to tackle tough problems. There are no wealthy slackers. None.

3. Make good choices.

Becoming successful is all about making good choices. Listen to smart, accomplished people, but in the end, trust your gut.

4. Always pay down your debt.

Better still, stay out of debt. There are exceptions. It’s okay to have a mortgage, but pay it down as soon as you can. And everyone needs a car, but they don’t need a new car.

5. Work in a high-demand, low-supply field.

It’s sort of funny how the most basic economic principle, the law of supply and demand, eludes most people. It’s so simple. Demand is proportional to price. More competition means less income and wealth. It’s that simple.

6. Learn to do one thing better than anyone else.

It doesn’t matter whether you learn it in school or on the job; strive to be better than anyone else at just one thing. You do that by accomplishing one thing at a time. It helps a lot if that one thing is something you love to do.

7. Be a raging workaholic.

Look I’m not saying you can’t have a family and fun. I do. But every wealthy person is also a hard worker with a strong work ethic. In other words, they get the job done, meet their commitments, and set a fine example for others.

8. Prioritize, focus, be disciplined.

Forget all the books and blogs about personal productivity and self-improvement. All you have to do is know your priorities, focus on what matters, and be disciplined about it.

9. Get equity.

Salary pays the bills, but saving money is challenging and it’s always tempting to dip into the cookie jar. Equity from stock, options, or business ownership solves that problem because it’s not liquid. In other words, you can’t spend it. Just don’t squander it when you can. Instead of cashing out, diversify your investments.

10. Don’t do what everyone else is doing.

The key message from my new book, Real Leaders Don’t Follow, is that nobody ever got ahead by doing what everyone else is doing. Nobody. Unfortunately, social media promotes cultural conformity, herd mentality, and dopey fads like nobody’s business. Leaders lead. Followers follow. You can’t do both.

About the Author

Steve Tobak is a management consultant, executive coach, columnist, and author of Real Leaders Don’t Follow.

The Rushmore Report: Stock Market Has Already Picked the Next President

There are many measures by which predictions are made for the next election. Political scientists use many tools – polls, surveys, demographics, and historical data. It should not surprise that Wall Street has an opinion. Indeed, Wall Street is sending out clear signs as to who they expect to win the presidency. Their recent activity confirms they are sure of who the next president will be.

The GOP is traditionally known as the party of Wall Street, but this year’s investors, for the most part, are betting against the Republican standard-bearer.

“The market appears to have decided not only that Hillary Clinton will win, but that it won’t be close,” David Woo, a strategist at Bank of America Merrill Lynch, said in a report distributed Monday. “Investors like landslide victories.”

Woo noted that the S&P 500 has risen more than four percent since July 5, which marks the beginning of the 90-day trading day countdown to the election on November 8. During years when presidential candidates won by a margin of more than 80 percent of Electoral College votes, the S&P 500 posted average returns of 8.4 percent in the 90 days leading up to the election.

The last time stocks outperformed the current rally at the halfway point was when Ronald Reagan won in a landslide against Walter Mondale in 1984.

“To us, this implies that the market is expecting Hillary Clinton to either maintain or increase her already sizable lead over Donald Trump in the opinion polls,” Woo said, citing the Iowa Electronic Markets, an indicator giving Clinton an 80 percent chance of beating Trump.

The IEM is a futures market operated for research purposes by the University of Iowa Tippie College of Business.

Earlier this year, Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence, noted that the S&P 500 has a fairly good record of predicting election results.

Since 1944, the incumbent person or party was reelected 82 percent of the time when the S&P 500 rose between July 31 and October 31, according to Stovall. The only exceptions were in 1968 and 1980, when there were popular third-party candidates in the picture.

“Whenever the S&P 500 fell in price during these three months, however, it signaled the replacement of the incumbent 86 percent of the time,” he said.

The latest polling numbers show Clinton leading Trump in most voter surveys, according to news and data aggregator RealClearPolitics.

The S&P 500 hit a record high of 2,193.81 on August 15 and is poised to extend its rally to six straight months. The Dow Jones industrial Average also realized a slight gain in August – which was its seventh monthly rise in a row, according to FactSet.

Meanwhile, the market is also expecting a split Congress and very little change in policy, according to Woo.

The volatility of the euro-dollar pairing, which the strategist views as a good proxy to measure the risk of change in the U.S. versus the rest of the world, is at a 2016 low, implying subdued expectations for policy change.

“The combination of a Democratic president and a split Congress likely means gridlock,” Woo said. “If this scenario materializes, the experience of the past six years suggests there is little chance of a major change in the fundamental economic policies of the most important country in the world in the foreseeable future.”

As a result, investors could expect lower interest rates and a weaker dollar. But in the event the same party wins the White House and control of Congress, the greenback will strengthen and rates will rise, Woo said.

About the Author

Sue Chang is a markets reporter based in San Francisco. She previously worked for Dow Jones Newswires in Asia, and currently serves as a journalist for MarketWatch.