Storm in a tea cup? - Trump times #060
A human investor's view
What a week. The week when global investment markets ‘bumped and ground’ to the tune of Mr Trump’s tariffs whim.
The first real week of walking in my (former) client’s shoes. Living off my retirement savings. The very thing I planned, invested and coached my client’s for as a Financial Planner.
We’re only human
Whether planners or clients, we’re just human. Even if we are experienced and knowledgeable investors we still suffer familiar human emotions – fear, anxiety, concern.
And so it was for me.
I was reminded of Autumn 2007. The time we set up our financial planning business, The Red House, just as the Northern Rock went bust. And markets started to fall…and continued to fall for nearly 18 months.
It was a time of doom-laden headlines, tax payers supporting the Banks and Quantitative Easing.
A time of anxious client calls. Those I thought would panic stayed calm. Those I felt sure knew better, panicked.
One of the panickers was a high flying CEO, an experienced investor. Initially I thought his desire to sell was an attempt to time the market – sell at a relative high and buy back as the market plunged lower. He listened to my calm reasoning – at 45, he wouldn’t be drawing on his pension for 20 odd years so what matter a little volatility? - to no avail.
As an alpha male, a leader, he was wired to take action. To do something. To feel like he had some control. Against my advice he sold, buying back a few months later. The net investment effect – zero. He may even have been down. Yet, he felt calmed having done something. He had the humility to see the folly of his actions after the event.
Instincts v data
It's hard to do nothing when your instinct is telling you to sell and run for the hills.
It can be equally hard as an adviser. Even when versed in market theory and data, to remain the voice of calm and ignore the voice inside saying “maybe it IS different this time” can be challenging.
So mid-market gyrations last week, I dug deep, as I had with my clients, and ‘treated’ myself to a Planner-Client talking to. It went something like this:
Planner me (PM) “What are you concerned about Ruth?”
Client me (CM): “I’m worried markets will continue to fall and all my best laid plans for my future will go to mush; I’m a little scared”
PM: “I get it. I can feel like that at times. Let me remind you. You have a Financial Plan. The portfolio that underpins the plan is designed to broadly follow what’s going on in global markets to give you the best opportunity for growth. We discussed it will go down from time to time. This is to be expected. However, do you recall the cash you’re holding - you know, to cover the next 3-4 years expenditure should markets fall? - this is what it’s for”.
CM: “I know, but what if the market stays down for longer than that?”
PM: “It’s an imperfect balance Ruth. Cash is a gloriously secure place to be in the short term, you know, for 3 or 4 years, but cash starts to get risky for longer periods due to that old devil called inflation. This is why the majority of your money is in shares. Afterall, we are planning for you to live for at least another 301 years!”
CM: “I know all of that but, what if it’s different this time?” The Million Dollar Question!
PM: “Do you believe, even though the world feels a little out of kilter right now, people will continue to buy quality goods and services?”
CM: “Yes”
PM: “Then, in the absence of a crystal ball, history and market data is our best guide. Whilst capitalism feels a little vulgar at times, the purchase of goods and services is the very thing which will continue to drive share prices up overtime.
CM: “So, I guess I should just let the markets do their thing, ignore the scare inducing, hysterical headlines, turn off the news and enjoy the sunshine?”
PM: “I couldn’t have put it better myself Ruth.”
Which is what I’ve done.
My golden rules
Even though markets are pretty much back to their pre tariff talk levels, perhaps we aren’t out of the woods yet. Trump aside, maybe in investment terms it is ever thus. None of us know the future.
Fortunately my years of financial planning, investment markets and life have taught me to hone five investment golden rules:
Have a Financial Plan. One that serves your needs (no one else’s) and has market movements already baked in.
Focus on what you can control. Your spending, your portfolio balance between shares, bonds and cash and your emotions.
Be aware but don’t dwell. Resist the urge to look at the value of your investments more than annually.
If you’re unsure, ask, seek help. And most importantly…
Make sure your affairs are arranged so you can sleep at night.
All simple, but not easy. Because after all, we’re only human.
You
As ever, I’m interested in you. If you’re living off your investments, or approaching that time, how do markets movements make you feel? How do you manage those feelings practically and emotionally? If you are a Financial Planner what are the nuggets of wisdom you use to help your clients (and you) stay calm?
Pour yourself a calming cuppa, coffee or cocktail and drop me a line, I’d love to hear from you.
And remember, you’re never going to be younger than you are today, what are you delaying doing waiting for ‘normal’ to resume?
Until next week my friends,
Ruth x
If you enjoy reading or find my blogs thought provoking please do comment, share with a friend or subscribe to 1000Weeks. I’d love to have you along. If you already do, thanks very much, I really appreciate it.
I know this blog is called 1000Weeks and is broadly predicated on the idea we live to age 80ish however, it is my clear intent to bust this age, hence I’m planning for at least age 90!
Dear Ruth, I read all your posts and always intend to comment and never do! This post of yours is so important and timely. Thank you. You always give me something to mull over. I have loved your musings on death !
Such great advice and with the Great Depression and various episodes of work wide recession lessons were learned and safeguards put in place to reduce risk for future economic down times. But this IS different because there is now an irrational narcissistic bully at the helm who prides himself on never reading a book and who has such simplistic views on how economics works. Like all narcissists he loves creating chaos and the bigger the scale the better! He is blithely cruel and destructive of people’s lives and the welfare of nations. What better way to avoid war if said country engages in trade partnerships! No longer. This is no tea cup!
Luckily for me, my OCD kicked in this spring and I spent 8 hours a day without eating or drinking working on my yard. I hate gardening but somehow after retirement got hooked on it (first by manually digging up my invasive choking ground cover). Unfortunately in my early days I inadvertently assassinated all my azaleas by heaping manure and soil too far up on the roots, thereby suffocating them! I tried various forms of resuscitation but this spring realized they were all DOA! In a fury over 2 days I dug them all up and some had grown into nearby tree roots (the trees will probably die next). I replanted all 12 azaleas along with 21 other plants mostly evergreens to be done with it! The Pacific NW means shade loving plants and also placed lotta of beat and thin, sitting or standing buddhas which I pray to daily to keep my plants from dying from my black thumbness!! At least no thoughts of Trump (slthough I did attend a HANDS OFF rally and march on April 5. It was Portland Oregon so of course turnout was huge. (Our senator was the ONLY ONE to vote against the Viet Nam war) I wore a mask (it was going to be an Elizabeth Warren mask but my face was too small) and I carried mace in case The Proud Boys or some such group showed up!