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With his tariffs, President Trump just unleashed all kinds of economic terror, not just on people and businesses in the US, but on those in nearly every corner of the world. Then what? He headed south to spend the weekend golfing at his country club rather than be confronted by the protests in Washington and other cities, due to his and Elon Musk’s actions and their devastating effects on families, their jobs, and their lives. Although he says “tariff” is the most beautiful word in the English language, Trump must have flunked his economics course. A tariff is a tax which makes things we all buy more expensive, promising much steeper inflation and hardships as millions of Americans struggle to make ends meet. You can gauge how devastating Trump’s tariffs will be by the stock market’s reaction. The two-day freefall ranks among the sharpest declines in history, according to CNBC. 

What should you do in reaction to Trump’s tariff announcements and the global stock market selloffs?  Sit on your hands and try to avoid the news. Unless you are an experienced investor with nerves of steel, almost anything you do might hurt you.  If you sell to stop the pain and preserve what’s left of your retirement savings, you will lock in losses.  It may seem hard to believe that the stock market will rebound, but it trends upwards in the long run, in spite of tumultuous periods like this one. Someday, today’s violent market swings will look like a tiny blip as stock markets continue to churn higher in the long run. If you can’t resist doing something, don’t sell, buy more. Stocks are on sale, so if you buy more, someday you’ll be happy you did. 

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It is very tempting to stop investing (e.g., buying new stocks and bonds) when you are afraid, when the news is terrible, or when your portfolio drops in value. It is tempting to sell your investments and stop buying new ones, when you think the president or congress are crazy, or horrible natural disasters seem rampant, or stocks and bonds seem way too expensive, or experts are recommending that you sell. But the only good reason to sell your investments is if you need the money, say if you are retiring soon or buying a house. But even then, you are unwise to sell all of your investments because, if you live for decades after you retire, the returns on cash don’t keep up with inflation, leaving you poorer over time.

At various times during my investing life, I have thought that selling many or all of my investments was wise. In almost all cases, I resisted the urge. In hindsight, it was never wise to sell everything. Even if I concluded that it was necessary to sell, how could I be sure it was the best time to sell? And how could I know that I wouldn’t regret selling? And how would I figure out the best time to get back in the market?

Most of us are terrible market-timers, unable to pick the best time to buy and sell. So, unless you are the next Warren Buffet, you will make far more costly mistakes than good decisions, if you try to decide the best times to buy and sell.

What is the answer? Start investing at the earliest age possible, invest as much as you possibly can regularly, and just keep doing it until you retire.

Letting your emotions drive your investing decisions is a recipe for disaster. If you set up an investing plan that enables you to invest as much as you can regularly, paycheck after paycheck, you will easily outperform most investors.

But, what If you can’t sleep at night? Spread your money around to different investments and ignore the news, experts, and your portfolio. Don’t buy the hottest stock; invest in mutual funds and exchange traded funds, which automatically spread your money around, reducing risk a lot.

Good luck!

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Fidelity Investments found that women earn higher returns on their investments than men. What’s the difference? Women tend to buy and hold whereas men are likely to trade more often. They also found that women are more likely to invest money outside their retirement accounts than they were in 2018. Women tend to hold too much in cash, though, being risk-averse. Fidelity Investments found that, even though women tend to lack confidence, their investing performance tops men’s. Men’s tendencey to trade hurts performance. Women wisely buy and hold, but they lack confidence Unfortunately, women tend to hold too much cash, hurting their returns.

The Times They Are a-Changin’. Interest rates are rising, the Omicron virus is raging, inflation is jumping, retail sales are sagging, and manufacturing has slowed. Earnings season is here and some banks are reporting dismal profits after enjoying robust growth during the pandemic. After big gains during the past couple of years, the stock market is struggling, evidence that investors are less complacent or optimistic than last year. There may be less to be optimistic about in 2022; it looks like we are in for some turbulence this year. Buckle your seat belts.

Has your 2022 started out well? Are you concerned about the economy? Are you worried that the Federal Reserve will damage the economy by raising interest rates too far or too fast?

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