263. Trump’s Economic Policies: Tax, Tariffs, and More

Curious how Trump’s economic policies will impact your portfolio? Join us on this episode of A Wiser Retirement® Podcast as we talk about strategies for navigating market volatility, emphasizing the importance of long-term investment approaches and systematic decision-making to capitalize on opportunities during economic transitions.

Related Podcast Episodes:
- Ep 257: The Election Outcome Impact on Crypto, BTC ETFs, and Bitwise Files for Index Product
- Ep 261: 2025 Market Outlook: Navigating the Year Ahead

Related YouTube Videos:
- Investing for Income vs Growth in Retirement: Finding the Balance

Learn More:
- About Wiser Wealth Management
- Schedule a Complimentary Consultation: Discover how we can help you achieve financial freedom.
- Access Our Free Guides: Gain valuable insights on building a financial legacy, the importance of a financial advisor for business owners, post-divorce financial planning, and more!

Stay Connected:
- Social Media: Facebook | Instagram | LinkedIn | Twitter
- A Wiser Retirement® YouTube Channel

This podcast was produced by Wiser Wealth Management. Thanks for listening!

Transcript

Trade Policies, Tariffs, and Economic Impact

Speaker 1 0:00

A concern is, you know, with the next administration, if Mexico and Canada you know things are kind of changing it's very fluid. You know, if we put additional tariffs on China, are they going to retaliate, and if that happens, then yes, that's is going to increase inflation slightly and it's not good for the US's GDP.

Speaker 2 0:23

Welcome to your Wiser Retirement Podcast. Are you curious about how Trump's economic policies will impact your portfolio? I'm Casey Smith. Today I'm joined by Andrew Pratt, Wiser's very own king of data. Each week, we bring you practical advice on retirement, investing and planning for your financial future. Don't forget to subscribe on Apple Spotify wherever you're listening to this podcast, so you don't miss out. Let's get started. Hey, Andrew, Good morning Casey. So this will be an interesting topic and I want to make sure that we're really clear. I mean, we're doing this the post on Inauguration Day. So happy Inauguration Day everyone. So we're not necessarily endorsing trump as a candidate, although we may have may not have voted for the man, uh, but the reality is donald trump is going to be our president, yep, and so we have to be able to navigate um through his uh trade policies and tariffs and things like that. Going forward, I think I'm very excited. I see people that are being proposed for cabinets that are my age and not like 150 years old.

Speaker 2 1:35

And we've always done it this way and this is how we do it. And I'm very concerned about 10 years when 75% of our taxes he's definitely mixing it up 75% of our taxes are going to go toward just paying our minimum interest as a financial planner. That's not a good thing. If it was our own personal finances, that would be detrimental, right? So I think that we have a two-year timeframe of doing some radical change. If you look at GDP, how much of that is actually just government spending and has nothing to do with?

Speaker 2 2:10

the free market is is uh kind of scary when you think about it. It is uh. So basically, we've just had a manufactured, somewhat fake economy.

Speaker 2 2:19

I don't I'm gonna use that's a little strong yeah but but uh, there's just a lot of government spending that could come back right, uh, and allow private spending to go up, which allows for a much healthier, uh economic environment going forward. Um, it's just going to take a lot of old people in congress and senate who should have been retired by now, uh, to think differently. And I think that's your biggest headwind is how do you get people who don't want to change the establishment to make change Uh?

Speaker 3 2:48

and so on that side.

Speaker 2 2:49

I'm like, uh, I don't know. But the good news is we've had in in tech world they call it an AB test, right? So we've had an A test where we've already had Trump as president for four years and we've had Biden for four years and people overwhelmingly chose a Trump economy versus Biden economy. So we'll see if that follows through. I think the chance of things being very positive also rely on Trump not being a buffoon when it comes to the pettiness that we had during the first administration.

Speaker 1 3:20

Yeah, and I think just not being quick minded. Yeah, and I think just not being quick minded, and if there's something that's not working, you know just being short sighted and maybe try to let things play out, not saying that that's happened before, but you know, if something is not coming to fruition as fast as he expects, maybe just try to, you know, pause and see if the policy because you don't want, you know, any of these new radical you know I say radical but these kind of outside thethe-box changes to you kind of want to see if they will play out and not to keep changing things Because that's not going to be good for the economy.

Speaker 2 3:54

Very interesting the Elon Musk dynamic this time around. I don't know that in the first administration they were friendly.

Speaker 2 4:00

I don't think they were the second administration, we've appeared to be much on, obviously on much friendlier terms, and I think that that Elon has brings the younger generation and what he's done in electric cars and space is absolutely amazing Right, and so I think that should have a positive effect, partially because the man doesn't need the US government. In some cases he's probably more powerful than any one single politician Right, maybe even the president on some days, right, yeah?

Speaker 1 4:31

And you've seen other big CEOs like Mark Zuckerberg and Jeff Bezos come into Trump's.

Speaker 2 4:41

Mar-a-Lago estate. Well, they have to now. Yeah, yeah, they have to now, but at yeah, they have to now, but at least they're willing to have conversations and try to work together and not be, you know.

Speaker 1 4:52

I was like closed minded, but you know they're, they're trying to work together.

Speaker 2 4:55

It's funny. You know Zuckerberg's out on social media now stating that the Biden administration would constantly call him and scream at him or his people about posting negative things about Biden and not him. It wasn't him personally, it's just people on the platform. And I was like, oh, now you tell us that. Why wouldn't you tell us in the heat of the moment that, hey, the government's doing this, so tell us after the fact which is very frustrating.

Speaker 1 5:21

His hands forced.

Speaker 2 5:22

Right, exactly, all right. So today we're going to focus on trade policy and tariffs. So let's start with the whole tariff thing. I mean, we've had a couple scenarios, kind of weird scenarios, with clients that they're just really concerned about trade tariffs, and I will say in full disclosure that most I say 99% of clients are concerned about trade tariffs. But we've had a few that focused on watching the View as their economic source of information, which I think is a very poor choice. And the people on the View say tariffs are going to trash the economy, and very one-sided news articles also say the same thing.

Speaker 2 6:09

In your research, what are you seeing about what happens with tariffs? And let me make one more statement. This is something that I've noticed in the last administration, and then it's already starting again in this administration with Trump, and that's the grandiose comments of Canada. Might be the 51st state. Right, we're gonna buy Greenland.

Effect of Tariffs on Economic Impact

Speaker 2 6:35

And what's happened is those countries or I guess we, denmark for Greenland um, all of a sudden said, hey, denmark's like, well, we would. We don't know about selling it, but we'd be happy to work on a joint venture on something. Canada's like hey, how about we use some of our resources for oil and we could help you with that Right. So sometimes you come in as the and I've done this before in times when I've had to negotiate business deals not related to Wiser per se, but the private equity fund that we've had many, many years ago is. You walk into the room, there's the craziest person in the room and people look at you, don't know how to take you, and they become a little fearful Right, and you use that advantage to then negotiate your position, which is usually somewhere in the middle, and so I see Trump doing that constantly, where he says crazy things and people take a verbatim, but in the end he's trying to negotiate back to what his real point is, which we don't know what that is.

Speaker 1 7:36

Right, I mean, yeah, as you said, he is more business, taking a more of a business approach to this. And I think you know, ultimately he, I think I think he knows and I think you know, ultimately he, I think I think he knows, and I mean he's, he is a smart guy, he has smart people around him that tariffs really aren't good, you know, uh, for the economy, um, and they don't really work. I think he generally is trying to use it as a bargaining chip and you know we've seen a few things already. You know, like there's a Chinese autumn, you know manufacturer plant that was shut down in Mexico, and then I think the Mexican president has sort of put some more restrictions on immigration. So I think you know he is using tariffs more as a bargaining chip.

Speaker 1 8:19

However, some of these countries are coming out and saying you know, we're going to put retaliatory tariffs back on you and you know that's what China did. Actually, you know, if we go back to his first term, trump on, you know, and the main goal he's doing this is he does want to sort of balance the you know, us trade deficit somewhat. But you know, with China, you know, during the first administration, you know we. He put on a 25% tariff on 60% of our trade.

Speaker 1 8:50

China. Actually, you know they, they have more flexibility and more you know trade partners and they were able to say, well, hey, we can retaliate and put you know this 25% tariffs on your imports as well. So China was able to respond to that. So I think a concern is with the next administration, if Mexico and Canada are able, and even if China things are kind of changing, it's very fluid If we put additional tariffs on China, are they going to retaliate? And if that happens then yes, that is going to increase inflation slightly and it's not good for um, the us's gdp what kind of tariffs are in place now with china?

Speaker 1 9:32

so right now it's the 25 which actually the biden administration kept uh 25 on 60 percent of our trade with china, and that's it's mostly agricultural. There's some other, I think, commodity like I think there's some steel in there, but that's really what's in place right now. And then, you know, I think, going forward it's sort of similar. But you know, I think Trump actually a couple of days ago came out and said you know, instead of for Mexico and Canada, we're going to tariff all trade. It's going to be only critical imports. So, um, so yeah, it's changing, Um, but I think he's being more thoughtful about it as of late.

Speaker 2 10:12

Yeah, um, I think that's interesting, though, because no one talks about the tariffs that are already in place with China, right, right, it's kind of like the same with deportations Uh, obama deported a lot of uh immigrants, uh, immigrants, right, no one talks about that either. So so, right now, we're at 25, we're 20 now, is that right? Or 20, 25, yeah, sorry, 20. So we're at 20 percent terror so really really talking about increasing terrorists by by five percent?

Speaker 1 10:38

well, 10 to china? Yeah, potentially, and then 25 on critical quote unquote for Canada and Mexico.

Speaker 2 10:48

So why do tariffs hurt the economy?

Speaker 1 10:51

So tariffs, it's a one-time inflation effect and there's not a ton of research out on this. But I just looked at and we actually have a graphic in here just you know, cpi year over year changes during Trump's first turn. If you look back during this time period, from where inflation started when Trump was inaugurated to its peak, it increased by about half a percent, a little bit less than half a percent. There was a good Goldman Sachs research piece that came out and they they pretty much said the same thing they don't expect, yeah, they expect inflation to creep up, but it's going to be like 0.3 to 0.4% and it's a one-time effect. So higher inflation definitely hurts the economy. So I think really.

Speaker 2 11:37

But if you're a but if you're a us based manufacturer, it probably doesn't allow you to sell more of your product, necessarily if you're competing with an imported product, but it certainly would level the playing field for you. Yes, if you're manufacturing I don't know, tvs would be a bad example. I don't think TVs manufactured here, but maybe US Steel is an example.

Speaker 1 11:59

Right, yeah, I mean I think, yeah, short run it's a little bit of a headwind, but more long-term, yes, it should bring production back more into the US and, you know, increase manufacturing in the US. But I think that it's more of a long term play.

Speaker 2 12:14

Yeah Well, it takes a long time to bring those things online. I mean we're still working on a chip plant right.

Speaker 1 12:19

In the.

Speaker 2 12:19

US. It's taking a very long time to develop.

Speaker 1 12:23

But I think, you know, as we've seen, there's been a lot of volatility in the market since the election and I think the markets are pricing in. You know this potentially higher inflation based on Trump's comments, and so I think a lot of that's baked in. I think what could really, you know, be I don't want to say detrimental, but you know cause more volatility is unexpected inflation, or you know whether it's more tariffs, if he's not able to use it as a bargaining chip, you know, as we think he could. So I think that's really the risk there.

Speaker 2 12:53

Yeah, do you think this happens day one?

Speaker 1 12:56

So I've seen, you know, again, there's not a lot of good research out here on this. From what I've seen, I think, Several things. Yes, that could happen on day one, or it could be a discussion point, because I think and I can't remember the exact name, but it's the US, mexico, canada, I think Trade Act is supposed to be revisited and I think two years, 2026. So I think for one article I read it's it could be like negotiation points leading up to that. It's it could be like negotiation points leading up to that. So so, maybe, so, maybe that happens. Or, you know, maybe it's like a, a partial, yeah, um, you know, who knows, I guess we'll, we'll see, but because when he was in office, the first time he he renegotiated uh nafta yes, north american free trade agreement right is that.

Speaker 2 13:42

Is that what's coming up for renewal, or is that something? This seems like a different trade agreement different trade agreement. What's the deal with Greenland? Why do we want Greenland all of a sudden? Do you know?

Speaker 1 13:53

There's a lot of good natural resources there. I think the US is sort of eyeing it as a good strategic position globally to have, I'll say, a base.

Speaker 2 14:05

But why would we have rights?

Speaker 1 14:06

to it presence, so I would have rights to it well, I think we're trying to purchase it from denmark and and and make them you know a territory or you know if they want. But you know, I think from what I've heard, um on the podcast I listened to this morning, is greenland actually they don't. They want freedom from denmark and the us, but they're willing to more work with the us. Um, but I think they see the us as a better uh partner just from an economic growth standpoint, because I think they have you know again, have a ton of natural resources that are not being. You know whether it's being mined or you know they think the U? S could bring a lot of you know whether it's investment or resources to them.

Speaker 2 14:43

Yeah, are they a territory of Denmark right now?

Speaker 1 14:47

So as a as a right now, yeah, I think they're considered territory, but they're technically under the Denmark government.

Speaker 2 14:54

Let's talk about economic impact. You think it could be neutral when it comes to tariffs.

Speaker 1 15:02

Yeah, I think really, again, over the short term it could be. The market again is sort of pricing this in right now, but you know, I think over the long term, if we are able to produce more domestically, that could be sort of an offset effect. I think that's what some of these other studies Goldman, merrill Lynch are saying. Maybe a slight hit to GDP and again this is one factor you know there's lots of factors to GDP but a slight hit to gdp the short run, one to two years, but over the long run it's going to be a net, uh, neutral effect yeah, we think about gdp.

Speaker 2 15:35

If we're supposed to be trimming the government and cutting out all the fat, um, you think that would have a negative effect on gdp as well I mean we're not doing eight thousand, so eight thousand dollar soap dispensers across the country um.

Speaker 1 15:50

The eight thousand dollars went to somebody's pockets right, yeah, and I think I mean, and we can talk about doge, uh now, if you want, but sure, um, yeah, I think, with this department of government efficiency, um, their mission is, I mean, they have three stated goals and this is on their I guess their main homepage that I found and it's regulatory rescissions, you know, reducing regulatory constraints to help sort of spur economic growth and, you know, kind of make things sort of move faster for investment in Congress. Administrative reduction obviously you know there's a lot of overhead, whether it's DEI, and I won't say necessarily DEI, but unnecessary positions that don't really need to be there, and then just cost savings. Does the government need to be sending all this foreign aid to countries? Do we need, as you said, that there's programs there, that and I won't name specifics but do we need to be spending this money there?

Speaker 1 16:56

So I think government spending does increase GDP, but it's, you know, if it's not going to positively affect the economy, then that's where inflation comes in. And so you know, if their mission is to reduce wasteful spending, if they're able and I think that's what they're going to recommend we'll see if that gets passed but but yeah, if they to reduce wasteful spending, if they're able, and I think that's what they're going to recommend. We'll see if that gets passed. But but yeah, if they can reduce wasteful spending and, you know, cut costs, then yeah, that would actually be a positive contributor to GDP growth.

Speaker 2 17:21

Yeah, let's talk about taxes. So the last major tax change was during the first Trump administration, 2017, that set to expire at the end of this year, 2025. What do you see happening here?

Speaker 1 17:37

It's widely expected that Trump's going to extend these provisions. There's a lot of different elements to this, with individual tax rates, qualified business income, corporate tax rates, state and local tax deductions, child care tax, I mean. So there's a lot of different provisions and I think and I was listening to you and Sean's podcast about this but whether Trump was elected or not, I think if a Democrat president was elected, a lot of these would have been continued as well. But I think now that there's just a higher probability that this tax cuts and job act program is going to get continued. Now that Trump is in office, he has his party in control of the House and Senate.

Speaker 2 18:28

One of the things he talked about and people go this is crazy, uh is not taxing social security at all. Right, so I did my own little research on that. You did as well. But social taxing, social security, only equates to one to two percent of the total revenue of the of the us government. It's a very small percentage. Yet the people only half the people who take social security are being taxed anyway. So I don't know. I think a middle-class retiree is still paying tax on social security, so it's a small drop in the bucket for them to not have to pay that tax, but it's certainly beneficial. But you kind of wonder does that cause inflation? If people have more money to spend, most likely they're going to spend it.

Speaker 4 19:27

Are you curious why annuities keep coming up as a potential investment option? People are often told that annuities can effectively mitigate investment risks and help secure their financial future. However, annuities often benefit the salesperson and might not be the best choice for you as a consumer. To learn more about the various types of annuities, the negatives of owning them and better investment alternatives, we have a free ebook on our website just for you to download our ebook. Buyer, beware, why do they keep trying to sell you that annuity? Simply click the link in the episode notes or visit wiser investor dot com. Slash guides. Now let's get back to the episode.

Tax Cuts and Economic Growth

Speaker 1 20:09

Investorcom slash guides. Now let's get back to the episode. As we may remember or have seen at one point in our lifetime, gdp equals consumption plus investment, plus government spending plus net exports. So you know, I think you know ultimately a tax reduction, you know, both on the business level and consumer level, if those individual tax rates remain at the same level or even potentially get lower, that drives up consumption inherently, and then that goes back into the economy and that increases consumption, and consumption is about over two thirds of our GDP. So that would be very simulative to economic growth.

Speaker 1 20:51

And then also going back to tax cuts, so Trump has come out. He lowered I think this was the first time that corporate tax rates were lowered in a long time I can't remember the exact date, but maybe even back from the 50s but corporate tax rates have been held constant around 34% for a long time. Trump actually cut that to I believe it was 21%, and then now he's proposing potentially to cut it lower to maybe 20%. But if your products are manufactured in the US, it could even be cut to 15%.

Speaker 1 21:28

Again this is just what he's proposing. So lower taxes mean more earnings, more retained earnings, which that means companies can invest more in the economy. So that's the I in the GDP equation, so that's investment. So obviously that should again increase GDP, if that were to happen.

Speaker 2 21:49

People keep saying the tax rates because the government's spending. The tax rates have to get higher in the future, drastically higher, and some people are making, in my opinion, poor financial decisions today because they assume that there's going to be a 60% tax rate down the road, 10 plus years from now. What do you think? Taxes overall, long-term, in relation to all this? Because I don't think we're going to get a balanced budget in the next four years, do you? No, no, so if we're not going to get a balanced budget, the government debt will continue to increase over the next four years.

Speaker 1 22:29

Again, I feel like Trump would pivot if it's to say, you know whether it's, if he cuts tax rates for for individuals and business owners, and then just say, like that happens, but then doge, you know, just say they're reduced government spending too much, um, and that's not really sort of helping, you know, whether it's economic growth or um, balance the budget somewhat. Uh, I feel like he would pivot some degree. So maybe he would walk back. You know policies in different areas, but yeah, I think obviously he has a vision in mind of how he can make all these cuts to government revenue or and or spending to help balance the budget. But if that actually plays out, then I guess we'll see.

Speaker 1 23:16

But I feel like he would pivot. But if that actually plays out, then I guess we'll see. But I feel like he would pivot and I don't think he would, under his administration, raise taxes Right, he might, you know, maybe instead of, as we said, like the corporate tax he proposed 15% for corporations. Maybe he doesn't go that low, maybe he just sort of mitigates that or, you know, kind of comes in the middle there.

Speaker 2 23:38

Yeah, we still have to solve the long-term debt problem and I think he's given lip service to that, but I haven't seen any proposals that really solve the 10-year problem.

Speaker 1 23:48

No, no, I mean, it is a problem for sure.

Speaker 2 23:52

And maybe that's something that his vice president does. If he runs for president in four more years, maybe that's something he could tackle.

Speaker 1 23:59

It's it's kind of a ticking time bomb again if doge is very and you have two billionaires, one of the one of them the richest man in the world heading this um department up. So I obviously have full confidence in their ability. But it is kind of a you know a needle that you have to throw because, again, government spending while we need to be more mindful about it. It is, you know, if you cut in areas that are leading to economic growth that can be a detractor. And you know you just got to be very careful where you cut spending.

Speaker 2 24:36

Let's talk about how this affects where you cut spending. Let's talk about how this affects portfolios. So how do you manage portfolios through what could be some radical changes in how we approach things in the US?

Speaker 1 24:48

I would say in general, we're just going to stay the course. We have a long-term vision and mindset on how we construct portfolios. We've done a podcast and have done research in mid-2024 around this. You don't want to time the market because time the market's very difficult and if you're trading tactically trading, moving in and out you have to make two calls. And studies have shown going back to 1950, if you stay invested, no matter who the president is Democrat or Republican, you've averaged about an 8% annualized return. If you stay invested only when a certain party is president, that return is drastically lowered on an annualized basis. So just from that research, we want to make sure we stay invested and sort of tune out the noise. And so overall, yeah, it's just want to stay focused on what your goals are financial goals in the long term, but just really just how it will impact the portfolio.

Speaker 1 25:57

I think, again, just kind of the short term, it's going to be a little bit of headwind, although equities can generally pass through inflation, but I think it will be a little bit more volatile market just because Trump's going to try to get his cabinet in place. He's going to try to again, he's going to try to make some drastic changes to how things are run in the government. So I think it's going to take a while to sort of for him to shape things how he wants it and for them actually to start producing results. So I feel like there could be some volatility around that, but I think in the long term, you know, obviously lower tax rates are simulative to economic growth on the corporation and business side and then if Doge actually does a good job, that could actually help too. So I think there are at least, as you said, lip service to some of these big problematic areas and you know, hopefully can address them and GDP there's no really correlation between GDP and market performance.

Speaker 2 26:52

Just because you have an increasing GDP and the economy overall is doing really well, it doesn't mean that the market is going to follow suit necessarily. There's other risks that are out there, yeah.

Speaker 1 27:03

I think, and I probably should look into this I think generally the long-term trends are intact, but, yeah, there could be short-term news, short-term, yeah, blips or interest cycle, business cycle I think it was William.

Speaker 2 27:19

Bernstein that said, the stock market is, in the short term, is a voting machine and the long term it's a weighing machine, meaning that there's lots of volatility, people voting with feelings and there's companies that don't make it. But because, in the long term, the ones that make it are the ones that are worthy of investing, in which ones are those? Um, usually it's. They're all listed in the S and P 500, for the most part, uh, but yeah, you, you could always have uh things not related to politics, and Ron was an example that derailed the market for a short time period. Um, but I, I go back to you know what? Whether he's successful in four years or not, people are still going to buy seats on Delta Airlines, united Airlines, american People are still going to buy Coke, people are still going to travel, right.

Financial Strategies for Market Volatility

Speaker 2 28:09

It's like our lives are going to continue as if everything is fine, right, right, and so those are the companies that you're invested in. You're not invested in any one politician inside your portfolio Exactly so, and also, too, is the style of investing. If you had loaded up on all green stocks when Biden was president, you're sorely disappointed right now, right.

Speaker 1 28:31

Yeah, and that's the thing, and I think we've talked about this in the past. It's like the, and I think part of it too is maybe like a run-up. Like you know, back in 2016, everyone thought energy and financial sectors would perform the best, but actually they I think they were like some of the worst performing sectors and there might've been I haven't really looked at this, but I think there is kind of like a run-up. You know, pre-uration in some of these areas as well.

Speaker 2 28:58

Yeah, I would argue that your oil trade. I don't think that'd be a very good one if you're trying to single that out, because his whole thing is reduce inflation, lower the cost of living for middle-class Americans, right, and that means lowering the price of oil, not increasing the price of oil, exactly Are you talking about, yeah, trump, yeah, and he wants to and I, and typically it's the wars of oil.

Speaker 1 29:18

Exactly, are you?

Speaker 2 29:19

talking about, yeah, trump, yeah, and he wants to. Typically, it's the wars of all the other politicians that have pushed up oil prices, not anything to do economically. Yeah.

Speaker 1 29:34

And if you think about supply-demand, I mean, and although I've seen that production has actually been still very high in thes, we just haven't really kind of um, doesn't really feel like that. But um, you know, if trump sort of puts more production online because I think biden did use a lot of our strategic petroleum reserve yes, um, so the reserve is way down, which is bad, but right, but if you put a biden administration.

Speaker 2 29:53

when inflation got really bad, they had no choice but to drill baby, baby drill Right. Exactly so the last half of his administration. Actually you got to give credit there that they actually did start producing more in the US.

Speaker 1 30:05

Yeah, and if Trump does, you know, ramp up production anymore, to you know, just say, to fill the strategic petroleum reserve, then that's, you know, obviously more supply. And if there's more supply that means prices go lower. So that's not really, as you say, good for energy stocks.

Speaker 2 30:23

Right, exactly. It's funny because when you talk about, hey, what do you do in all these cases, people are expecting us to say this is what you do with your portfolio, you got to switch this, and you got to switch that, and you have to be on this side and you have to hedge this, and you get all these really fancy words. That's not how it works.

Speaker 2 30:44

I was telling someone well, I guess I was talking to our team yesterday and I said you know guys, portfolio management is really simple. The formula is really simple. If you want to be successful. Unfortunately, the behavior that you have to have is really hard. It is.

Speaker 2 30:57

And that's the value of financial advisors to make sure you're having the right behavior and not not focused on doing the wrong actions. And so it's just easier for some than others. Human nature typically sets in. Sets in at some point and you have self doubt on is this the right strategy? Am I doing the right thing? At some point, and you have self-doubt on is this the right strategy? Am I doing the right thing?

Speaker 2 31:20

Markets down over the last month. People are, hey, should I be moving more to bonds? Well, no, you shouldn't be moving more to bonds because the market's down In the short term. You're taking losses in order to buy bonds that are more higher in price right now. Right, so that's solo buy. High doesn't make sense to me. You need to look at these.

Speaker 2 31:41

If you're still working, these are opportunities. If it's a volatile market, I hope that it's really down on your payday and then, when you get your paycheck, then that percentage that went into the 401k plan bought more shares because in the end, you want to buy as many shares as you can. If the market's down, you get more shares per dollar. They pay dividends based off of how many shares you have, not how many dollars or what the price of the stock is. So, yeah, if you're retired it's a little different game and the portfolios are built differently and the cash reserves are higher and there's different strategies there. But when you're building wealth and you're in the wealth creation stage, I mean you don't want it to be horrible to where you lose your job. But hey, a good 10% sell-off is a great opportunity to pick up massive returns over the long term.

Speaker 2 32:28

But we aren't wired to think that way normally. I'm just a guy that went through the financial crisis in 2007, 8, 9. And I kept a little bit of a journal during that time span. And when COVID happened, I remember digging through my desk door going, you know, I kind of wrote things down a decade ago and I went and I found it and it was. It was take advantage of opportunities, don't be scared. That that's kind of was the theme that I was writing back in 2008, 2009,. Looking back on it as we were coming out of it, I mean we, we had a tremendous rate of returns in 2009. And I remember thinking, man, if we weren't dollar cost averaging or trying to work our way back into the market, we should have. We should just been a hundred percent market the entire time. It would have been scary, but we would have come out ahead of the average.

Speaker 1 33:12

Yeah, and going back to that other point we talked about is you know a lot of uh former colleagues and people that I know in the industry from what they've said during that time frame I was just coming out of school then, so wasn't really living through it, um, but it was. It was easier to kind of sell uh during then, but it was it was hard to buy back in and and a lot of people miss out on a lot of return because they waited to buy back in because of that behavioral, um, you know those biases.

Speaker 2 33:43

Yeah, and there you know, there's also professional biases like oh, inflation is going to be going crazy. We didn't see inflation for like what? 17 years or something, and all these people were short-term bond funds waiting for this inflation that it would net. That never appeared until a coven really. Uh, so it it. Um. There's just a lot of things out there that are half truths, and if you tell yourself something long enough, you start believing it. Uh, this is why we have you as the king of data, because it's the data that tells the story, not not our emotions should never tell the story. Right, and and and. When you build a portfolio, you have to build it based off data historical data but also future projections as well.

Speaker 1 34:26

Right, and, as you said, I think, just for peace of mind, dollar cost averaging, systematically buying into the market, just kind of can help some of the like these volatile moments and periods of time and and to sort of average out your uh cost basis. Great, If you have cash, right, right Like a 401k. But people talk.

Speaker 2 34:46

People talk about 401ks all the time. So a dollar cost average of the year? I said, no, you don't. You got paid. You invested a hundred percent of the money right away, right, that's not dollar cost averaging. I mean, yes, you put money in over time, you got an average price, but you didn't have that money. You don't have December of 25 paycheck yet, so you can't say I'm going to go ahead and invest that, right? So so you, most people invest a hundred percent when they get the money. That's what you do.

Speaker 2 35:11

Oh yeah, you just get the money over over time. So is that dollar cost averaging? I mean, I don't know. Yeah, over time. So is that dollar cost averaging? I mean I don't know. To me dollar cost averaging is when you have $500,000, maybe you inherited it, whatever, and you work it in over time.

Speaker 1 35:24

And I understand why people do that, because they're like, oh man, just want to dump all this 500 grand in one way, yeah, that's fair, and I think there's lots that show that dollar cost average doesn't really help over the long term if you just you just pick up.

Speaker 2 35:36

Vanguard has a great study saying that it's better just to invest lump sum if you sell your business. It was fully invested in your business prior, so put it in in the market 100 the. The secret is having enough cash to where you never have to go into a portfolio in an emergency. At the same time, the market's down right, that's. That's the secret of all this is cash management. It's all the worst. Thing.

Speaker 1 35:58

Yeah exactly.

Speaker 2 36:00

Well, I digress, but yeah, thank you for going over this, andrew. I think these are obviously not all the Trump policies. We clearly steered away from any of the things that aren't finance related, but I think we have a really good chance here to right some decade-long wrongs, economically speaking, and I hope that the old gray-haired guys and gals in Congress will realize that, hey, we're on a train headed to the wrong destination, and maybe they'll use this opportunity to make some change. My guess is that most of them will probably try to fight it, and that's sad. That's sad for our country, it's sad for our kids, but we can't keep doing what we've been doing. The good news is I love capitalism, and capitalism wins it does.

Speaker 2 36:49

If they totally screw this up and the next administration screws it up? People are still buying cola, they're still buying clothing. I mean, companies are always going to find a way to make money, and that's what the portfolio is about. How do we invest in companies that have good long-term prospects? And the S&P 500 is full of this? Right, thanks for listening to today's episode. If you want to learn more about Wiser Wealth Management, you can do so by going to wiserinvestorcom. We also have a few related episodes. Episode 257 is the election outcome impact on crypto, bitcoin ETFs. Bitwise files for index product that's episode 257. Product that's episode 257. 261 is the 25 market outlook, navigating the year ahead, and we also have a video or a YouTube channel. On YouTube it's called A Wiser Retirement, same as the podcast, and we'd link to investing for income versus growth and retirement, finding the balance. I don't know how you invest for income these days. I think all those things are so overpriced, but people are still doing it. It's amazing. All right, thanks, andrew.

Speaker 2 38:02

We'll see you next time, thank you.

Speaker 3 38:04

Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestorcom and reach out.

Speaker 3 38:21

This episode was produced by Rachel Dotson. This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products, securities, digital assets or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities, digital assets or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients, listeners or similar interests. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional and or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.