A half dozen tariff-fighting ideas for your investments in these uncertain times
Six investing do’s and don’ts for investors worried about U.S. tariffs. on our exports, and retaliation against their products by Ottawa:
Do: Find some cash to buy any dips ahead, for Canadian, U.S. or international stocks. Buying in a correction powers your long-term gains better than most other moves. Long term means five to 10 years or more. For money needed to meet near-term objectives, stay away from stocks because things could get ugly.
Don’t: Make bets on sectors that will prosper or be crushed in a trade war. Forecasting winners and losers is based on analysis plus guesswork, and current trade issues could be resolved before too long. If you’re determined to bet for or against a sector, keep your exposure light. Under 5 per cent.
Do: Revisit your portfolio’s diversification into stocks and bonds. Paramount is your ratio of stocks to bonds – it should reflect your age, proximity to retirement and willingness to run the risk of a short-term stock market correction in exchange for higher long-term gains. Portfolio mixes should not change according to current events. The default mix is the 60-40 balanced portfolio, with the stock side of the portfolio more or less divided evenly between Canadian, U.S. and international stocks. Bonds have been up and down in recent years, but they’ve looked good in recent weeks.
Don’t: Dump U.S. exposure. It will have zero impact on Mr. Trump or any other Americans and deprive you of returns from companies that dominate globally. If you’re excited about AI and other tech breakthroughs, you need U.S. content for long-term investing success.
Do: Consider a taste of crypto if you’re open to something speculative and – supposedly – not tied to stocks or bonds. Crypto got hit hard on Monday morning, along with stocks. Mr. Trump has shown some enthusiasm for crypto currency – check out a chart of bitcoin prices to see the impact. There are no fundamentals to underpin the price of crypto – it’s all speculation. But pro money managers are starting to incorporate a bit into portfolios. The asset allocation exchange-traded funds from Fidelity have a crypto weighting of up to 3 per cent. Day to day, crypto is a yo-yo. Be ready.
Don’t: Go all-in on guaranteed investment certificates as a low-drama alternative to stocks and bonds. GICs are a fine partner to bonds in your portfolio, but don’t overcommit. With rates that top out in the high 3 per cent zone, the case for GICs isn’t what it was 12 to 18 months ago. Inflation could run higher in a trade war, which depletes your real rate of return from GICs. And then there’s the lack of liquidity in these uncertain times.
