“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” Warren Buffett

We’re experiencing the third full-blown investment bubble since I became a financial adviser in 1997. In the late 90s we had the “tech bubble,” the early 2000s the “real estate bubble,” and now the “bond bubble.”  Investors are so afraid of stocks they’ve pulled money out in record amounts over the last two years and sunk it into bonds, particularly US government.

I recently saw a chart which compared cash flows into investments.  The chart was the mirror image of the late 90s.  Then cash flowed into tech stocks in massive amounts with miniscule flows into bonds.  Now the chart is the opposite with record flows into bonds and huge withdrawals from stocks.  The bubbles look identical just the reverse investments.

Coupled with that was a poll in which people, invested in US government bonds were asked, “ If you sell those bonds before maturity can you lose money?”  Over 80% answered no.

So many people are so fearful that they’re putting money into investments which after inflation the return is negative.  And they’re doing it to be safe.  The refrain continues, “Well at least I can’t lose money in it.”  Some will be surprised.

Yet, this isn’t about stocks versus bonds.  Both have their place.  The focus is how fear drives bubbles.  And the result of investing in bubbles can be financial devastation.

Virtually all the greatest investors have learned to overcome fear.  They have the ability to stay calm and level headed in the midst of the severest economic storms.

Warren Buffett, as per the above quote, learned through the years to use other’s fears and the extremes they produce to his advantage.  He’s faced with the same economic threats as everyone else yet he’s learned to overcome the panic and capitalize on it.

When others are panicking and driving prices low he’s buying at bargain rates.  When others are in a buying frenzy, fearing they’ll be left behind, he’s selling to capture the euphoria created profits.  And he has become one of the wealthiest investors of all time.

Yet, I realize for all of us that’s far easier said than done. It’s much easier to look back at the bubbles and think, “Well, of course.  Now I see it.  That makes perfect sense.  What were people thinking?”

When we’re in the midst of the storm though it’s far different.  When all the media pundits are predicting the “end of the world as we know it” it is a lot tougher to stay calm and go against the tide.

Then, we just want safety.  Interestingly, it was also proclaimed, “You can’t lose money in tech stocks.”  Then, “You can’t lose money in real estate.”  Does anyone still think that?

Now it’s said, “You can’t lose money in government bonds.”

And that’s the trap.  There really is no investment we can’t lose money in.  Particularly if you figure in inflation and taxes.  And sometimes we can lose a whole lot.

So how do we survive?  How do we thrive?  How do we overcome that fear?

There’s a great verse in James that says, “If any of you lacks wisdom, ask God, who gives generously. But let him ask in faith, without doubting, for the one who doubts is like a wave of the sea that is driven and tossed by the wind. He is double-minded, unstable in all his ways.”

The problem?  Being tossed around by every wind of change.  Seem familiar?

And the promise?  We don’t have to.  We can be stable and calm even in a raging storm.

But how?

Some things I see.

If we want wisdom and guidance God offers it. We simply need to ask.  If we don’t he won’t force it on us.  I’m amazed at how much time I can spend fretting before I just ask.  Yet, when I do he guides me in amazing ways.

Second, ask with faith. We’re to anticipate an answer.  Expect God to lead us and answer our questions.  He’s really there.  He wants to talk with us.  We’ll sense his direction when we anticipate receiving it.

And that causes us to listen. The answers may not come immediately but as we ponder the questions the guidance will come.  This can take time.  Sometimes we need a place and time away from distractions so we can hear God’s quiet voice in our hearts.  But, my thought is this, I can either spend the time worrying or listening.  Listening seems a whole lot more productive.

Fourth, if we keep going back and grabbing the worry again then we shut off our minds. Instead, we chose not to panic.  We just don’t let it be a part of our lives.  This keeps us from bouncing around emotionally.  Keeps us stable.

And finally, we just realize God wants to bless us. He’s protecting and guiding us even now.  He’s blessing us not begrudgingly but generously.  He wants our lives to be extraordinary and he’s guiding us into it even when we forget to ask.  As we rest in that love it gives us courage.

Are you being bashed around?  Need to find some calm to restore your courage?

What helps you find your calm place?  What helps you be fearless?

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Important Disclosures:

Douglas Armey, the LPL Financial adviser associated with this website, practices in Fresno, California and may discuss and/or transact business only with residents of the following states:  California, Idaho, Arizona and Oregon.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results.

Stock investing involves risk including loss of principal. Past performance is not a guarantee of future results.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.

Securities offered through LPL Financial, Member FINRA/SIPC.  Member of Securities Investor Protection Corporation (SIPC).  For an explanatory brochure please visit www.sipc.org.          www.finra.org