I saw this headline recently online, and of course it caught my attention. Robert Shiller, the Nobel prize winner for economics in 2013, was expounding on his belief that the human race has deep underlying fears about technology and the lives their children will lead in the future, based on what he is seeing in the financial markets.
Shiller says, “They are worried about their future. They are worried not just about next year, they are worried about the next twenty years, the next forty years. So they are desperately trying to provide for that, they’ll even accept negative yields.” (Source: CNBC, January 28, 2015).
I’ve seen this worry as well in meeting with clients and talking with others in the industry. The “Great Recession” of 2008, with a 55% decline in the Standard & Poor’s 500, shook everyone to the core. Six years later, even though the stock market has nearly tripled from its lows in early 2009, this fear is still prevalent. What if it happens again? There has become a culture of predicting the next “bubble”, the next financial sector to fall apart and wipe out our hard earned wealth.
Does this fear make sense? In one respect yes, as it is true that financial markets are unpredictable and volatile. There are ways to reduce this risk though, namely through the principle of diversification. We constantly remind our clients to learn from the past, as history can and will repeat itself! Make sure that your portfolio is properly diversified in the good times as well as the bad. Diversification doesn’t guarantee that you won’t have losses, but it has proven to greatly minimize risk. Used properly, diversification should reduce your fear that your money is going to go away.
But in another sense, I encourage you to look at fear differently. In the Bible, the most repeated command is “Do not be afraid!” Why does God give us this command over 100 times in the Bible? I believe it is because He knows our nature, and He knows our propensity to be fearful. He knows that we are inclined to make things our idols and to turn out attention from Him. When we value something too much, the natural inclination is to become fearful about losing it. By keeping God and His promises as our focus, we’ll keep our priorities straight and we’ll be better able to stay calm during life’s challenges and adventures.
Robert Shiller may be right that most people are afraid of the future, but you don’t need to be! All it takes is a change in what you focus on. Start trusting in God’s promises and you’ll soon find out that living without fear is the way to go.