It’s 5am.
I’m at the farm, sitting here at the kitchen table, staring at my screen … and watching the US stock market get absolutely hammered. It has plummeted close to 5% since I went to bed last night, in response to Trump’s ‘Liberation Day’ tariffs.
Journalists and media pundits absolutely live for days like this. There are so many ‘bloodbath’ headlines. So much clickbait casserole. So much ‘breaking news’.
And every article is saying pretty much the same thing: Trump’s tariff plan is stupid. That it will plunge the US economy into a deep recession. That it will have devastating impacts around the world.
Scared yet?
Look, it makes total sense that you may be thinking to yourself:
“This is a really uncertain time to be investing. None of this sounds good. Maybe I should just sell my shares and move my super to cash until this clears up.”
Well, let’s talk about that.
I have a coffee in my hand. The kids are still asleep. It’s just you and me. Today I’m going to tell you what I plan on doing with my own money. But, before I do, let me give you my take on the Trump tariffs.
First, this is not meant to be sound (or sane) economic policy – it’s a negotiating strategy. Trump views the world in terms of winning and losing, and he wants every country on earth to lose, so that he (and America … but mostly he) wins.
Second, and even more importantly, he’s just told every American that the global system is rigged, and that America is being unfairly treated.
Now, I don’t think that’s true. In fact, since World War II, free trade has lifted more people out of poverty than at any other time in history. Yet facts don’t matter.
Besides, this line of argument gives Trump someone to blame when the economy tanks: he had the guts to stand up to the global bullies – it’s their fault, not his.
Third — and let’s be honest, most predictably — he’s keeping the world’s attention glued to him like a toddler with a tambourine.
So, back to you.
You’ll hear people say that now is a very ‘uncertain time’ to be an investor.
Yeah, nah.
The truth is that it is always an uncertain time to risk your money. If you think it’s safe, you’re simply not paying attention. However, what history teaches us is this: the price you pay for earning long-term life changing compound gains is having to stomach short-term uncertainty.
And here’s the thing about trying to protect yourself in the share market: you don’t just have to be right once – you have to be right twice. First, you’ve got to guess when the market will fall further. Then you’ve got to guess the exact moment to jump back in. And spoiler alert: no one rings a bell when it’s safe to invest again. (Just ask the people still waiting to buy back in after the Covid crash.)
So what should you do instead?
Simple. My advice hasn’t changed since I wrote The Barefoot Investor.
If you’ve got a home loan, focus on boosting your super contributions to 15% and pay off your mortgage like your future depends on it – because it does. That’s the plan. Boring? Maybe. But it works.
Then, in the final three years before you retire – whatever age that is for you – consider getting your super fund to invest your future employer contributions in cash. The goal is to build up a buffer of three to five years’ worth of living expenses (after any pension payments you may receive), so when the market drops you don’t have to stress or sell. You’ve got time on your side.
As for me? I’ve paid off the home loan. So every month – rain, hail, or full-blown Trump tantrum – I throw money into three low-cost index funds. The louder the noise, the cheaper the shares.
Tread Your Own Path!