The stock market & tariffs - update

Ok, all thank you for your questions. I think the best way to understand my thought process on this issue is to understand my guiding principles when it comes to investing. I think everything really falls under your timeline, your risk tolerance, asset allocation, and thoughts on timing.

There is always a risk to investing and it’s just something we have to accept in order for the chance to get a higher return on our money. This is also why asset allocation is so important.
I am a long term investor. With that I have a timeframe for investing that is longer than 5 years. I expect volatility to happen in the market and therefore I divide my investments up in a way that will allow me to capitalize when prices are low and also allow me to last another day. I do this through dollar cost averaging and I do this through diversification in funds. I do have single stock in my portfolio, but that is not when the majority of my money is.
If you currently hold investments, most likely your share price has gone down maybe by a little or maybe by a lot. It depends on what you are holding. In my opinion, the stock market is down not because businesses are doing bad, but because of uncertainty. This is making good companies share prices go down even though they have good sales and and are profitable. If that is the case, then once the idea of tariffs settles in either one way or the other, it is reasonable to expect the share price to go back up unless due to tariffs that particular business is no longer profitable or sustainable. So for example, if you bought shares of a company for $100 back in .January and now the company is share price is $50, you would only be able to sell your investment for $50 and you would have a loss because your cost basis was $100. However, no one is forcing you to sell right now and its a good chance the share price will bounce back.
I don't believe in extremes and I don't allow the news to make me that emotional. I have gone through the dot com bubble, 9/11, the great recession of 2008-2009, covid and currently through tariffs. I've seen what happens when people panic sale and then try to get back in. They lose their money and hurt themselves more than they would have if they just left it alone. What you see in your portfolios are unrealized losses ( losses on paper). You only actually lose real money when you actually sell your investments. If you decide that the volatility is making you too nervous and you feel like your portfolio is too aggressive or feel like you have a idea of what industries will do well in the future, many people do 2 types of things. 1. you can sell the assets you have and then buy into something less aggressive or even a different industry, or 2. you can leave your current assets alone and just start buying the other things you want. This will change the mix of your portfolio ( asset allocation) and thereby move it in the direction you are thinking of.
I do not try to time the markets. I set up the amount of money I'm willing to invest on a consistent basis and I keep investing. This means I invest when the market is up and when the market is down. I don't put money in that i cannot live without and i'm willing to let that money sit and believe that it will grow in the long run.
I also have money set aside to take advantage of opportunities in the stock market, but also outside of the stock market - this is what Nadia and I explain in the FI Academy where we talk about the " greenprint" framework. If you are in the 14 day trial phase check out the resources we have in the FI Academy so that you can understand more of what I'm talking about
I believe there is no wrong time to invest. History has shown that even with the wrong timing, over the long run investing beats just putting your money in the banks. However, this is also a good time to work on your budget and really get your money in order for emergencies and also to take advantage of potential opportunities not only in the market, but also in things like real estate and potentially starting businesses among other things.
Dividends are always something I see on the table. Dividends are related to the earnings of companies and if the company is doing them in a sustainable way, that company knows their business and cashflow well enough. Can and will some businesses dividends be affected by these tariffs? Possibly. It remains to be seen because we aren't sure if these tariffs are just tough talk and a negotiations tactic or if it is something that will really be long term. In my opinion, based on politics, if the economy and the markets don't go up dramatically, then the republicans will lose power in the midterms and the president will lose the power he currently has to get things through. Also companies aren't like individuals, they can't turn their businesses and practices that quickly so the affects on dividends may not be seen this quarter or even this year. Dividends are a lagging indicator.
I don't believe this could trigger an economic meltdown that would take a decade or longer to see meaningful growth. I am not a doomsday type of person. The longest recession/depression we've ever had was the great depression and that lasted 5 years. The stock market is made up of companies that run businesses. These companies are real assets that generate revenue, this is not the same as commodities like gold or bitcoin that have nothing but investor sentiment that leads them to be valuable. I'm not saying I don't own gold or crypto. I am saying do not underestimate the resilience of the stock market. I cannot tell you where to invest or not to invest that is a personal choice. Our main goal is to provide you with education and the tools you need to make decisions on your own. Not to provide personal financial advice.
Based on my experience on wall street when I was in asset management and we charged fees, when then market was going down or volatile for a long period of time, we actually lowered our fees. The fund managers that want to keep enough money under management will be silly to charge their clients more, because it would be very easy for their clients to go to another company and take their money with them.
This may also be a good time to see how these actively managed funds are doing compared to passively managed ones and see if these fund managers/advisors are actually worth the money they are charging. I'm curious to know where you heard the term " higher risk equals higher costs." It should be higher risk equals higher returns.

In the end, knowing your timeframe, and your risk tolerance asset allocation, and diversification allow you to have a strategy and a plan you can fall back on and not let the news/noise make you panic. Investing is different from trading. Traders worry about the day to day, long term investors have the ability to wait things out. Hope this helps!

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