This post is directed at people who don’t get the markets. People who think they they are experts can stop reading now.
I’m the Chairman of the Pension Board of the Reformed Presbyterian Church of North America. Yes, that long-lived, but small denomination that never went through the controversies of modernism, still teaching that Jesus Christ rules everything on earth NOW, and we exclusively sing the psalms of David without accompaniment in our worship.
Here is something that is no surprise: most pastors who are serious students of Scripture don’t get financial markets. Truth, that is true of most people who know their technical crafts, but don’t get how financial markets work.
What I am about to say should work for most people who don’t get investing — choose a blend of risky and less-risky assets. Ask your self this question: how much are you willing to lose in a year at worst as a percentage of assets? Take that amount and multiply it by 2.0-2.5. That is the maximum amount that you should allocate to risky assets. (Strangely, that mostly corresponds to the current margin rules.)
Average people can’t monitor the markets, and even if they did, they would not know what to do. Far better that they “set it and forget it,” than that they panic when things are are going bad, or get greedy when things are running hot.
Thus we encourage the pastors to buy blended funds. I encourage them to buy one notch down on their risk tolerances, because the return give-up is small, but the likelihood of them not panicking is large.
For those who are uninformed, that is important. Buy-and-hold is a good strategy, if maintained at a risk level that avoids panic.
Now. I’m not crazy about the market at present. I would shade allocations to the 2.ox side of risk, not the 2.5x side. But what we have found at the pension board of the RPCNA is that the pastors do best, who choose a blended fund that they can stick with through tough times.
My own pastor is squeamish with investing, but I looked at what he “should” do in investing, and told him to dial it back one notch. It has been to his benefit. He has not panicked, and has made decent money over the last 10 years.
Thus to summarize: estimate your willingness to lose money over a year, and size your allocation to risky assets appropriately.