The Peak That Feels Like A Loss

Have you ever bought something for a certain price and when it came time to sell it you felt like you couldn’t sell if for less than you paid for it?

We’re shopping for a new vehicle for our large family and I have to sell my old Honda Odyssey. I remember we paid $12,000.00 for it (it was already used). I hit up the online car value tools and found out it’s only worth between $2,000.00 and $5,000.00 now. I know we got a lot of use out of it over the past 6 years but sheesh. It feels like I’m taking a $10,000.00 loss.

This feeling is more likely to hit on assets that are supposed to appreciate like your house, a stock, a baseball card, a beanie baby, or silver.

It works the other way too. Do you remember how much stamps used to cost? Or a movie ticket? Or a quart of ice cream? If you’re like me sometimes you’ll find yourself saying “I’m not paying that, that’s outrageous.”

If your portfolio was just at an all-time high and has come down 5%, 10%, or 30% from it, why does it feel like a loss even if you’re up significantly long-term? Why does any number below that remembered number register as a defeat?

The Cognitive Trap: Anchoring to Temporal Highs

Many of us experience this instinctively. We hesitate to sell our house when the market is down. We feel like we lost money when the market pulls back 5% even though it happens all the time.

There’s a lot of research out there on behavioral finance and one of the O.G. writings on this phenomenon came from Daniel Kahneman (of course) and Tversky where they identified “anchoring” as a mental shortcut people use:

“This article described three heuristics that are employed in making judgments under uncertainty: … (iii) adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available. … Because of anchoring, people will tend to underestimate the probabilities of failure in complex systems. Thus, the direction of the anchoring bias can sometimes be predicted.” (Tversky & Kahneman, Science, 1974)

In investing specifically George and Hwang’s 2004 study on momentum showed how powerfully this operates:

“Traders use the 52-week high as a reference point against which they evaluate the potential impact of news. When good news has pushed a stock’s price near or to a new 52-week high, traders are reluctant to bid the price of the stock higher even if the information warrants it. … Similarly, when bad news pushes a stock’s price far from its 52-week high, traders are initially unwilling to sell the stock at prices that are as low as the information implies.” (George & Hwang, Journal of Finance, 2004)

For retirees with taxable accounts, this can mean being reluctant to realize losses during a dip (which means missing opportunities to execute tax-loss harvesting or strategic rebalancing). Something called the “disposition effect” (holding losers too long hoping to avoid recording a loss) makes things worse, having a short-sighted view that sabotages the most efficient use of capital in a long-term scenario.

This thought process is very real and predictable. Yet from a Christian perspective, it points to something much deeper.

Sin’s Distortion of Judgement

Yeah. It’s sin. The effects of the fall inhibit our understanding so we cling to markers that may not make sense to make us feel in control and give us comfort. Rather than rest in wisdom and trusting in God’s sovereign providence we grasp at visible markers.

Are we resting in market highs for our comfort? Is our security found in our portfolios only going up? This deeper malfunction can lead to some really practical missteps in our stewardship of what God has entrusted to us. Not understanding providence hurts us. Cornelius Van Til, elaborating on Romans 1 describes how sin distorts our knowledge:

“Knowing God as well as he does … he yet refuses to accept the truth in its full significance … because that, knowing God, they glorified him not as God, neither gave thanks; but became vain in their reasonings, and their senseless heart was darkened.”

The retiree may freeze up in fear, rather than take advantage of God ordained opportunities for efficiency. Remember, the Lord owns the cattle on a thousand hills (Psalm 50:10) and directs everything: including market shifts.

We have an anchor that will hold (Hebrews 6:19)

The Renewed Mind: Long-Horizon Faithfulness

Part of our sanctification as believers is having a renewed mind (Romans 12:2) which means believers are enabled to live well and exercise wisdom.

Abraham Kuyper famously said:

“There is not a square inch in the whole domain of our human existence over which Christ, who is sovereign over all, does not cry: ‘Mine!’”

Knowing that God is in control of everything from salvation to the economy we are freed from the worries of the day and can shift our view to an eternal one. That’s the ultimate long-term view. We are freed from being frozen by short-term drama and can act with liberty and grace. We steward wealth as instruments in the Redeemer’s hands.

On a practical level one way to execute this stewardship is to do some tax-efficient planning and generous actions that can bless our heirs and the Church for generations to come.

Tax Strategies That Span Decades

Strategic Roth conversions are a way to do this. Systematic conversions in low-income years (especially those before taking RMDs and social security) can save hundreds of thousands in lifetime taxes if you have sizable pre-tax savings. A market dip from the highs creates even more room to do these. A temporarily lower portfolio value means more shares to convert at lower tax-brackets. Tax-loss harvesting can offset future gains.

This isn’t speculation, it’s historically proven. Reducing lifetime tax-drag preserves more money for retirement income and more importantly more capacity for generosity.

One-Time Large DAF Gifts are another way to take advantage of drops from the highs. Simply “pre-giving” by bunching up donations into a Donor Advised Fund (DAF) can yield huge tax savings and increase the amount you give over your lifetime too. Let’s say you give $20,000 a year to your church. Maybe you itemize that amount, maybe (like most people) you don’t because of increasing standard deduction rates. What if you “pre-gave” 10 years worth of tithes to your church ($200,000) in one year to a Donor Advised Fund that pays out $20,000 a year to your church? You’d be able to take an immediate deduction (up to 60% of your AGI for cash, 30% for appreciated assets). This could free up space for even larger Roth conversions or high income years.

These ideas have a long-term view in mind and build a sustainable retirement while minimizing taxes and maximizing Kingdom impact.

Conclusion

The same providence that ordains market movements calls you to faithful, long-horizon stewardship. By breaking temporal anchors through a renewed mind, you position your resources for decades of tax efficiency and multiplied giving.

If this resonates, book a call. We’ll review your portfolio, model Roth ladders and DAF strategies, and ensure your plan honors both sustainable retirement and your calling to generosity.