Tariffs Troubles? Remember this Timeless Tip: “It’s already priced in.”

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Image: Canva Custom Creation/Lowrie Financial

By Steve Lowrie, CFA

Special to Financial Independence Hub

A key concern many investors have at the moment is the impact of Trump’s tariffs on goods produced outside the U.S. on the markets. I’m hearing from those wondering if they should do something to protect their wealth; their primary question is: What should I do with my investments?

My answer (as it usually is when investors are concerned about the geopolitical impact on the markets): stick with the plan because, by the time the news is public and you become concerned, the markets have already accounted for it/priced it in, so any reaction you take is too late.

A useful historical reference on tariffs is President Trump’s first term. Starting in 2017, his administration targeted China, implementing tariffs on a broad range of products by 2018. The following years saw ongoing trade negotiations that led to an agreement, though many tariffs remained. Despite the uncertainty, both U.S. and Chinese markets outperformed the MSCI World ex USA Index over Trump’s four-year term. Have a look at the data from 2017 to 2020, as Dimensional compares China MSCI Index to US S&P 500 Index to MSCI World ex USA Index.

Markets are forward-looking, meaning that the potential economic effects of tariffs are likely already factored into current prices. As a result, when these anticipated changes materialize, their impact on markets may be limited.

Understanding how Market Pricing Works

Let’s talk about the price of stocks.

It stands to reason: To make money in the market, you need to sell your holdings for more than you paid. Of course, we’re all familiar with good old “buy low, sell high.” But despite its simplicity, many investors fall short. Instead, they end up doing just the opposite, or at least leaving returns on the table that could have been theirs to keep.

You can defend against these human foibles by understanding how stock pricing works and using that knowledge to your advantage.

Good News, Bad News, and Market Views

How do you know when a stock or stock fund is priced for buying or selling?

The short answer is, we don’t.

And yet, many investors still let current events dominate their decisions. They sell when they fear bad news means prices are going to fall. Or they buy when good news breaks. They invest in funds that do the same.

While this may seem logical, there’s a problem with it: You’re betting you or your fund manager can place winning trades before markets have already priced in the news.

To be blunt, that’s a losing bet.

You’re betting that you know more about what the price should be at any given point than what the formidable force of the market has already decided. Every so often, you might be right. But the preponderance of the evidence suggests any “wins” are more a matter of luck than skill.

Me and You against the World

Whenever you try to buy low or sell high, who is the force on the other side of the trading table?

It’s the market.

The market includes millions of individuals, institutions, banks, and brokerages trading hundreds of billions of dollars every moment of every day. It includes highly paid analysts continuously watching every move the markets make. It includes AI-driven engines seeking to get their trades in nanoseconds ahead of everyone else.

And you think you can beat that?

We believe it’s far more reasonable to assume, by the time you’ve heard the news, the collective market has too, and has already priced it in.

  • News of a recession, under way or avoided? It’s already priced in.
  • Inflation on the rise, or abating? It’s already priced in.
  • A company suffers a calamity or makes a major breakthrough? It’s already priced in.
  • The government passes critical legislation that helps or hinders global trading? It’s…

And so on. Here’s your best assumption:

If it’s public knowledge, it’s already priced in. (And if it’s insider information, it’s illegal to trade on it.)

What we don’t yet Know

As soon as an event is priced in, several things make it difficult to profitably trade on the news:

You’re Buying High, Selling Low: If you trade on news after it’s been priced in, odds are you’ll buy at a higher price (after good news) or sell at a lower price (based on bad news). Continue Reading…

The slow track or the fast track to Wealth

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AlainGuillot.com

By Alain Guillot

Special to Financial Independence Hub

What is the role of wealth in your life?

The role of wealth in one’s life is a complex and multifaceted aspect that varies from person to person. Not everyone wants to become wealthy.

For some, wealth is a means to an end, a tool that facilitates the pursuit of their passions and goals; arts, leisure, family time. Others prioritize different aspects of life, such as love, beauty, sports, or creative expressions like dance and fashion. These individuals might view wealth as a secondary consideration, simply needed to sustain their chosen paths.

There are those who lack clear goals, accepting life as it comes without a distinct sense of direction, merely following societal trends.

On the other hand, some individuals place great importance on wealth, believing that it simplifies and enhances all other aspects of life.

The two tracks to wealth

The pursuit of wealth can be approached through two distinct tracks: the slow track and the fast track. Which track you take depends on your priorities, your ambitions, your self-confidence,  and your willingness to put in the work.

What is the slow track to wealth?

The slow track involves accumulating wealth over time through consistent savings, often achieved through a regular job and disciplined investment strategies. This method, while reliable, requires patience and decades of dedicated effort. It’s a route that many can take, but societal conditioning to spend rather than save often hinders its widespread adoption. If you work a regular job, save every month and invest in low-cost index funds or ETFs, it is almost guaranteed that you will become wealthy.

Let’s do a quick example. For this example, let’s ignore the effects of inflation.

Let’s imagine that a person saves $5,000 per year and he/she gets an average return from the market of 8%. How long will it take this person to become a millionaire?

It will take 36 years to accumulate $1,000,000.

To save $5,000 per year is not that difficult — practically anyone can do it — but most people are conditioned to spend, not save; therefore,  very few people will become wealthy even though it is within their reach.

With one million dollars, a person can spend about $80,000 per year for the rest of their lives without running out of money. The slow track is not bad at all.

What is the fast track to wealth?

Most people who become millionaires do so by creating businesses. They take risks and responsibilities that others are not willing to take. They have a vision of where they want to go, they eliminate all the excuses and work relentlessly toward their goals. A fast-track business should make you wealthy in 20 years or less.

Two fast-track scenarios

Continue Reading…

Looking to treat your loved one this Valentine’s Day? Give the gift of a financial conversation

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Only half of Canadian couples discuss finances in detail, an IG Wealth Management study conducted by Pollard found. This week may be a good time to examine your joint lifestyle and retirement goals.

 

Image by Deposit Photos

By Blair Evans

Special to Financial Independence Hub

Valentine’s Day is here and while love may be in the air, there’s an often-overlooked gift that can strengthen your relationship: a meaningful conversation about finances.

Unsurprisingly, many Canadian couples shy away from discussing money with their partners. According to a recent study by IG Wealth Management, in partnership with Pollara Strategic Insights, only half of married or common law Canadians discuss finances with their partner in detail, with roughly a third talking about it only briefly.

Yet, when thinking about your future together, especially retirement, these conversations are crucial. You and your partner should be aligned on your retirement goals and lifestyle to ensure you plan appropriately and are fiscally prepared to enjoy those golden years.

Transparency on Finances can pay off in multiple ways

Image by Pexels

Transparency around your finances and having proactive conversations with your partner can also pay off come tax season.

Working together to file each of your tax returns can unlock opportunities to maximize deductions and credits.

You may be able to transfer unused credits, like tuition and disability amounts, to your partner to help alleviate their tax bill.

Couples can also combine their medical expenses and charitable donations together to minimize their overall tax obligation.

If your relationship is built for the long haul, it’s important to plan for life’s uncertainties.  Building an emergency fund, as well as having an updated will and power of attorney, along with proper life and disability insurance plans are essential to prepare for any emergencies or untimely circumstances. Continue Reading…

Why you shouldn’t chase Investment Trends

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Whether it’s a hot stock, a cryptocurrency surge, or a trending investment tip, many retail investors will fall into the trend of what we call FOMO or Fear of Missing Out. But here’s the problem: chasing the crowd often leads to poor financial decisions and ultimately regret. It’s easy to want to chase investment trends, especially when you see others gaining quick returns. Before you jump the gun take a breath and learn why this isn’t a good strategy for retirement.

Adobe Stock Image courtesy Logical Position

By Dan Coconate

Special to Financial Independence Hub

Investing successfully requires a steady hand and a clear plan, especially when you’re planning for retirement or managing your hard-earned savings. However, the allure of hot investment trends is almost always hard to resist. Promises of fast gains or stories of friends capitalizing on can’t-miss opportunities often tempt even the most cautious investors.

For retirees and those approaching retirement, chasing these investment trends might feel like a shortcut to safeguarding financial stability. But the reality is far different. Keep reading as we discuss why you shouldn’t chase investment trends and what to do instead.

The Value of a Long-Term Strategy

A stable, long-term investment plan carries more weight as you near or enter retirement. Unlike younger investors focused on aggressive growth, retirees prioritize income-generation and capital preservation. Chasing short-term trends often contradicts these goals.

Retirement planning requires balancing risk with steady returns. Staying invested in a diversified portfolio of assets tailored to your goals ensures consistency, even during market fluctuations. For example, dividend-paying stocks or well-selected bonds generally offer more stability compared to speculative trends. By adopting a long-term mindset, you’re more likely to see your investments support you throughout your retirement years without the stress of rapid, unpredictable market movements.

Why Trend Chasing feels tempting

The urge to follow trends isn’t purely rational: it’s psychological and herd mentality plays a big role. When you see others profiting from specific investments, it’s natural to feel compelled to follow suit. The fear of missing out, or FOMO, will amplify this instinct, making it hard to stay disciplined. This emotional response, however, often clouds judgment and leads to rash decisions. Continue Reading…

Stock Market Anxiety leads to Bad Investing Decisions. Here’s what to do instead

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Ignore stock market anxiety and negative stock predictions and instead focus your investing strategy on diversification and portfolio balance

Image by Pexels/Markus Spiske

The current state of the world is generating stock market anxiety, as it often does. My guess is that the Israel-Hamas war is just getting started and will last a long time. I also suspect that Russian dictator Vladimir Putin had something to do with getting it started, and will do what he can to keep it going. After all, when it comes to running his country, Putin takes a grasping-at-straws approach.

Putin may think that bringing the longstanding Mideast conflict back into the headlines is going to improve his chances of conquering Ukraine and bringing the Soviet Union back from the dead.

He thinks taking a long shot is better than no shot at all. Who knows? He might get lucky.

Early on in his war on Ukraine, Putin seemed to think that Chinese dictator Xi Jinping was going to take pity on him and his country, and offer free money and/or weapons to shore up Russia’s Ukraine invasion. Instead, Xi insists on staying out of the war, while paying discount prices for Russian oil. He takes special care not to let his country get caught up in the economic sanctions that the U.S. and NATO countries and allies are directing against the Russians.

It’s not that Putin is stupid. If a war between Israel and Hamas turns out to be a big drain on the U.S. budget, the U.S. might have less money available to arm Ukraine.

Up till lately, however, Israel has had little to say about Russia’s treatment of Ukraine. Israel may soon take a more active role in helping Ukraine defend itself.

Any war is a terrible thing, and this one is no different. The stock market seems to be creeping upward. Maybe it knows something that Putin hasn’t figured out.

Meanwhile, if your stock portfolio makes sense to you, we advise against selling due to Mideast fears.

Stock market anxiety recedes with investment quality, diversification and portfolio balance

You’ll find that many of your worries concern things that are unlikely to happen; that are already largely discounted in current stock prices; and that probably won’t matter as much as you feared they would.

You get a much better return on time spent if you devote less of it to worrying about high-risk investments, and more of it to an investing strategy. Create a strategy that is built upon analyzing the quality and diversification of your investments, and the structure and balance of your portfolio.

There’s another advantage as well. A calm investor is much less likely to react in haste and make sudden decisions that could prove to be damaging in the long run. Continue Reading…