Media Note: On July 15, William Wood was the guest on “Your Money Matters Today” with Cornerstone Wealth Advisors. With hosts Steve Campbell and Ryan Miracle, Dr. Wood talked about mistakes that special needs parents should avoid. The podcast is to be posted here, but meanwhile here’s a link to an article that includes most of the show content: 13 Mistakes for Special Needs Parents to Avoid.
- It’s too late; and
Here’s what I mean. Asset markets move very quickly on news. Any obvious Trump-proofing measures that can be taken have been taken — in fact, that happened before mid-morning on the day after the election. Buy more defense stocks because of additional military spending? Fine, but those stocks have already fully incorporated the election. Sell technology shares because of immigration policy changes? Too late.
So that brings us to the second answer: do nothing. If you have a well-balanced portfolio, you haven’t placed a bet on any particular sector — and so it doesn’t matter which sectors gain and lose under Trump.
The best investment strategy to deal with unexpected electoral news is (wait for it) buy and hold index funds.
There’s a paid ad in my Facebook feed from the New Yorker (paidpost.newyorker.com) on “How to Live Luxuriously Right Now.” Here’s a sample: The New Yorker recommends used “Vintage Timepieces” like a classic Omega 3177 watch from the 1970s for only $4,695.
Right, that’s $4,695 as in almost $5,000. Notice that for this price, you don’t get better time-keeping than with say, a $90 Casio Wave Ceptor watch (my personal favorite). The Casio syncs with the mother clock once a day. Mine has never been more than two seconds off.
So what do you get for $4,695? A piece of jewelry, mostly. I do not know how to recognize such a fine watch, but I’m sure there are people who do, and who care, and who are impressed by someone who wears such a watch.
[I would not, as we say out here far from New York, “trade you even,” that Omega for my Casio — because then I’d have to worry about losing or damaging the thing. And nobody’s going to mug me for my Casio watch. I actually like the Casio’s dial better, too.]
If you want to spend almost $5,000 on a watch like that, fine. But don’t pretend there’s any thrift involved. And if you have friends who will be impressed by your show of wealth — uh, what kind of people are you hanging out with? [Don’t get mad; I’m just asking.]
Here’s my updated take on prepaid phone plans — still the best deal!
Over at investmentnews.com, a writer has discovered that investment advisers are largely white males, with little diversity. I’m not surprised — but what should a woman or person of color do in response? First, recognize that there are thousands of investment advisers out there who are totally welcoming and affirming to their diverse client base.
But beyond that, if you don’t feel respected by the investment advisers you audition, consider this: Educate yourself, and buy and hold index funds. You’ll discover that you don’t need an investment adviser at all to get a good start on building lifetime wealth. If you follow simple passive strategies, before too many years go by, you’ll have enough money that the investment advisers will treat you with great deference. (Money talks in that business.) And it’s only then that you’ll need the tax advice and compliance help that investment advisers can provide.
But as to getting stock picks that will beat the market from an investment adviser? Forget it! The “advantage” of being comfortable with a stock-picking adviser will vanish in costs that make those picks almost certainly worse than buying and holding index funds. Whether you’re white, black, red or even purple, you can leave those “pale, male and stale” advisers with their stock picks in the dust. Trust me, the best index funds don’t know or care about your race or gender. They just keep providing superior long-term returns.
Here’s an investment firm’s commercial — I have highlighted the key part:
Why do people invest?
They invest for what’s next.
That could be a college dream, a new priority, an active retirement.
Whatever next is, it takes smart investments managed by experts who actively spot risks and opportunities.
[Name of firm] has been doing that for over 65 years, helping millions of investors achieve what’s next.
For a minute, consider what I recommend — the opposite of that firm’s alleged strategy:
- Smart investments? No, I recommend stupid investments, just index funds that hold essentially every stock.
- Managed by experts? No, I recommend funds that instead aren’t managed at all, since they hold everything and only do minor adjustments to stay in balance.
- Who actively spot risks and opportunities? No, I recommend not even trying to spot opportunities, neither trying to sell bad stocks on the way down or to buy into promising stocks on the way up.
And the result: My recommended stupid passive management strategy brought a ten-year return of 8.10 percent (in my favorite total stock market index fund). Go over to that other firm’s site — the one with the active experts — and you’ll see: They found it hard to beat a stupid passive strategy. But don’t be too hard on that firm. Its competitors fell short of the indexes more than half of the time, too.
The bottom line? Buy and hold index funds.