DLS Consulting

Fear Or Greed, Which One Is Harder For You?

In my capacity to serve the donors of In His Steps Foundation, I am privileged to head an investment advisory committee that oversees our foundation’s investments. I look forward to our periodic meetings and we just completed our quarterly gathering this past week. You can imagine like most investors, the past year has not been an enjoyable time when we have been faced with down markets and once in a generation creaks in the economy. Our deliberations have been openly frank and brutally honest in the nature of how we feel a need to keep a steady hand on a long term objective while still showing great compassion for short term fears on the part of our investors. As I stepped away from this month’s meeting, I was struck by the extreme feelings my clients have had in dealing with greed and fear. Two such clients and the eras stuck out for me.

During the late 1990’s, the technology and stock market bubble was building to a crescendo. In 1997, 1998, and 1999, we were roundly criticized by some of our clients for not being more aggressive. A woman in her sixties came to our office for an annual review and was accompanied by her 22 year old nephew. Her retirement account had grown with us from $230,000 to $675,000 from 1993 to 1999 and we felt she was in good position to diversify into more bonds and enjoy her retirement since she still worked at a part time job. Her nephew convinced her that we were doing a lousy job and asked us why we were not trading in the stocks he liked? He was doubling his money every quarter or so and our compounded return looked like peanuts to him. His aunt agreed with him and she pulled her account and left us. Many of the bulletin board stocks that he was trading in vanished into thin air in the next two years. Our client did not return but I did see her years later at the mall and at that time she was almost 70 and working full time. It was the greed card being played by a well meaning family member.

In October, 1987, world wide stock markets started to drop as the “new” bull market that started in 1981, was running out of gas. Market drops of 25% to 30% took place in so short a time period that long term investors had little warning to take profits and exit the market. Many people were still recovering from the down markets of the years from 1968 to 1980, and now were wondering why they were still in the market. As the phone rang daily with clients who feared losing it all, they wanted to know what I thought they should do. Even then, our clients were more diversified than most investors as we moved them into tax free bonds and a broad array of different forms of investment alternatives. Most of our clients were down less than half of what the stock market was down, but their fear factor said it must be worse and they felt it was worse! Only one client sold half of everything he owned while all of our other clients stayed the course. Fear can make us do strange things when it strikes in sharp down markets.

If these events of the past year and those from other challenging market periods have not taught us anything else, it is time to refocus our attention on the important things of life. Ron Blue calls this turning down the noise of the world and turning up the Word of God. Do you find yourself today lamenting that you didn’t buy in at the market’s recent bottom, or fearful that you should be selling and getting out now that its rebounded? If you feel angst both ways, you might be reflecting the huge amount of cash on the sidelines managed by frightened disbelievers. Time to turn down the noise of the world!

I John 4:17-18 (RSV) “In this is love perfected with us, that we may have confidence for the Day of Judgment, because as he is, so are we in this world. There is no fear in love, but perfect love casts out fear. For fear has to do with punishment, and he who fears is not perfected in love.”

Monday Morning Message Sent 5/11/09


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