Stop hiding

If you let it, the gloom will immobilize you. One lesson my financial years have taught me is that analysis becomes paralysis. And, later, regret.

There are things in life you can change. Even the big stuff – partner, career, family, house – all flow from decisions that are yours alone. But geopolitics, macroeconomics, wars, Kevin O’Leary, monetary policy, recessions, Drake and coronations are way out there.

That brings us to Trump, of course. He’s currently the biggest news story on the planet, and likely to stay that way. If he keeps his word, imposing fat tariffs a week from Saturday, economists will have that cow they’ve been incubating. Scotia says the results will be ‘devastating… ruinous” while CIBC figures the hit will equal about Covid-x-2.

Given Tariff Man’s dominance of the news cycle and the moaning from the bank towers, it’s easy to lose focus.

Don’t.

Get Trump out of your head. Better to concentrate on what you and your family need to accomplish. Just pretend he’s some crazy 78-year-old dude who wears makeup with a criminal record, three wives and a personality disorder living in another country. That should help.

“Thank you for being a voice of reason in these challenging times. I appreciate the amount of work it takes to produce something relevant and impactful every day,” says blog dog Neil, in frosty Nunavut. “What types of ETFs would you suggest investing in given the current political climate? Also, should we wait until February 1st to invest?”

Nothing changes, Neil. The idea of a 60-40 mix between growth and fixed income assets stays. So does the principle of having a third exposure to Canada, a third to America and a third international. Ditto for hedging against the Canadian dollar with at least 20% in US$-denominated holdings. You should still hold only ETFs, for low cost and high diversification, and rebalance routinely. Once a year would be fine.

Current holdings could be in these weightings:

Cash (lots of good hi-rate ETFs to pick) 2%
Bonds (global, Canadian, & floating rate) 25%
Preferreds (including N. American hedged) 13%
Maple equity (TSX, dividend funds plus 5% REIT) 22%
US equity (S&P, small cap, value & tech) 20%
International (global equity, dividend, emerging, far east) 18%

If you don’t have a big pile of money, one or two ETFs (low cost and high liquidity) in each category is sufficient. If you have a million or more, holding around twenty funds is reasonable, giving more diversification and hopefully less volatility. The long-term goals is to harvest a yearly six or seven per cent consistently over the decades. Last year was explosive. This year may not be. But most people invest for distant goals, like retirement or a kid’s education. So never, ever, make long-term decisions based on short-term stuff. Like who’s in the White House or giving a Nazi salute.

As for timing, simple. When you have money invest it. Waiting is market timing, and over the course of a life, it never works. Going to cash, fearing losses, hiding because of headlines or leaving money fallow is the result of emotion, not reason. You’re not smarter than Mr. Market. There will always be volatility, but history also shows gains outpace losses and assets advance far more often and robustly than they fall. Get in the game. Stay in. February 1st is just another day on which uninvested money will do nothing.

Needless to say, Neil, take advantage of the fulsome gifts which the tax system bestows. Retirement money can grow tax free with contributions deducted from taxes while you work. The TFSA allows tax-free income in retirement without reducing government benefits. The first-home savings plan is a ridiculous giveaway with deductible contributions, taxless withdrawals and the ability to flip it into a retirement fund. RRIFs will finance senior years while giving growth to stay replenished. Kids can get free education grant money through an RESP. And those RRSPs can be used for income-splitting and allow you to benefit from selling yourself assets you already own. Dividend income is tax-advantaged, and the best profits you’ll ever make are through capital gains.

Meanwhile, Neil, be hopeful. Tariff Man may ruin careers in Ottawa and Washington but he’ll also bring a low-tax, less-regulated, machismo capitalism that will make the billionaires happy, and also line the pockets of those who stay calm and keep their portfolios while keeping their heads.

Be confident. And rejoice daily that you do not have a blog.

About the picture: “I hear you are short of poster cats so here is Alvin!” writes Leah. “He is our 8 month old Siamese. He is a sweet gentle soul. Thanks for being a voice of reason and sensibility.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/01/23/stop-hiding/