Oh boy. I didn’t think it would ever come to this.
Apparently U.S. voters are more fed up with “the establishment” than I thought – they’d rather have a reality TV star *cough* run their country.
Welcome to the White House Mr. Trump. Like the American public maybe you have little idea of what you’ve really done.
Like U.S. market futures crashing the night of the election last week only to rebound higher, like a yo-yo, I have no idea what the future holds when it comes to the economy, markets, oil prices or our Canadian dollar. I like to make predictions, and some of them turn out to be true, but nothing is assured when it comes to the future.
Will Trump send Canada and the rest of the world a message with U.S. protectionism? Is he going to repeal every move Obama made?
Here’s how I’m going to invest with Trump in office.
Stay the course – focus on investing in equities
With interest rates moving higher this winter, it might get more expensive to borrow money during Trump’s term. That will likely trickle over to Canada. Low rates have been around for what seems like forever, and low rates have pros and cons.
Pros of low rates:
- Great borrowing costs to finance homes and cars.
- Great borrowing costs for business investments and ventures.
In general, credit is cheap. This makes spending money look like the right thing to do.
Cons of low rates:
- They hurt folks with fixed income assets like bonds and saving accounts.
- They do not reward fiscal responsibility, by businesses or individuals.
In general, money is too cheap. It makes saving money look like the wrong thing to do.
I don’t hold any bonds or fixed income in my portfolio because of this reason. So, what I have left is staying the course – which means for us a focus on investing using equities. In our portfolio this is done via dividend paying stocks and indexed Exchange Traded Funds (ETFs). Regardless of what policies The Apprentice puts in place or reverts we’re going to continue to invest the same way we always do.
Stay the course – focus on debt reduction
People who forecast the weather, pollsters, and talking heads on TV who forecast the markets are the only folks that get to keep their job when they are consistently wrong. Must be nice…
Although my crystal ball is always cloudy there is one thing I’ve learned over the years – with servicing debt you pay other people first. For most of us holding long-term debt obligations to other people is not a great recipe for success.
Here’s what we plan to do with our debt during Trump’s time in office:
- Continue to slay the mortgage dragon via mortgage prepayments. The more money that goes on our mortgage principal, the more our net worth will grow. Net worth up, debt down. This is good.
- Avoid using our line of credit. We won’t touch it unless we absolutely have to.
- Continue to pay off all credit card transactions every month. This means avoiding purchases on our credit cards we cannot pay off in cash the following month.
- Kill off our car payment next month. This means the end of car payments for the foreseeable future for us (we intend to pay cash for our next used car in 2017 or 2018). Along with the other 2012 car we own I’ll drive this luxury beauty in the meantime.
Trump might blow up trade agreements. He might build a wall (and tell other countries to pay for one). He might deport millions. He might accidentally use his Twitter account to share FBI security details. He might do all these things and much, much more.
When it comes to our finances, we’re not planning on doing anything different with Trump in the White House.
As for finishing off the bunker in our basement, and ensuring our generator can support it, that’s another story.
What are your investing plans with Trump in the office?
I feel like I should be doing something to account for Mr Trump taking over but I don’t have a clue what to do. Invest more? Sell everything? Let it ride? Build a bomb shelter and stock up on survivalist stuff? Having said that I will likely do what I most always do, procrastinate.
Lloyd, I’d bet on defence stocks like LMT, GD, RTN, gun stocks like SWHC, RGR, TASR. Other sectors like Internet security, pharma and U.S. bank stocks should also do well…in theory.
If anything, I’d lean towards cash. At least until there is some direction to the new administration.
If you have cash to invest and keep some on the sidelines when that happens Lloyd, you will be rewarded 🙂
Agreed. U.S. stocks like banks, pharma and also infrastructure should do well.
Hopefully Mr Trump will hire better advisors to help him run America than the ones he had when his companies went bankrupt on four occasions.
We can only hope but I’m not holding my breath. This might be a nightmare four years…
Same in Canada. Fiscal prudence has been thrown out the window.
Though I really did not think Trump would win, I did believe he would be better than any of his or the opposition. I’m not talking personally or some of the things he said, just that I’ve worked with many smart American business people and they do get things done. I may not have agreed with them on issues or even liked them (liked many) but as for business, being creative and getting the most from the bottom line, they were better than many Canadians. I also like he’s not committed to big backers.
He is responsible for running his own companies into the ground. It seems his advisors served him very well advising him on declaring bankruptcy for his company. It is reported he avoided paying hundreds of millions of dollars owed to others which allowed him to rise from the ashes multiple times, each time stronger than before with more protected assets.
Hopefully his advisors now will actually help avoid him not playing the same games with the USA vs. other countries.
Great post as usual Mark! I was also hoping for a stock ‘sale’ post-election due to the unpredicted result but that didn’t happen.
We are very similar in our strategies Mark. We also invest in a mix of dividend paying stocks and ETFs (no bonds or fixed income). We paid off our mortgage a few years ago which was soo nice. Now every spare dollar goes towards investments, which I find much more motivating than paying down debt! Like you, I drive my old car (2005 Honda Civic) with pride! : )
I’ve noticed from a previous post that your goal involves a $30,000 dividend portfolio from your TFSA and taxable account. Some argue that it’s not advantageous to use a taxable account unless all your registered ones are maxed out. Is there a reason why you’ve decided to build up a non-registered account? Or maybe your RRSPs are all maxed out? We have solely focused on RRSPs and TFSAs (not maxed out due to aggressive debt reduction strategy in the past) and I’m wondering if this is the best approach.
Great to hear from you. Yes, our approaches sound similar.
I can’t see myself selling our CDN stocks for many decades, we will use the dividends for some living expenses within the next 10 years.
Wow, nice, paid off mortgage. We can’t wait 🙂
Well done on the old car. New cars with shiny new car payments are a wealth destroyer.
“I’ve noticed from a previous post that your goal involves a $30,000 dividend portfolio from your TFSA and taxable account. Some argue that it’s not advantageous to use a taxable account unless all your registered ones are maxed out.”
They are. I have no TFSA or RRSP room left.
Only my wife has room in her RRSP, and she’s working on maxing that out for an early semi-retirement in 6 years. It should be maxed out in 2018.
Wow, nicely done! Plus with your workplace pensions…you’ll be golden!!
Do you mind me asking at what age you and your wife are looking at early semi-retirement? We’re thinking that we’ll likely have to wait until the kids are grown and in university (another 10 years).
Keep up the great posts! I’ve been a regular reader of your blog for years.
We hope to semi-retire at age 50, targeting age 55 for full retirement; i.e., working if we want but not needing to work if we don’t have to.
Thanks for being a fan 🙂
I had hoped that the market would crash or at least drop by 10%. Not to be, so I did what I wanted to do (if it dropped), bought more of the stocks I already own. The expected yield was lower than hopped for, but my over all income is above what I wanted for the year (actually next year). I’m now fully invested and my next years income is above my goal.
Good to hear from you….yeah, you didn’t get your wish either eh? 🙂
Fully invested and churning out the income you do, well, you’re golden!
Just my own thoughts on your excellent article. I don’t borrow money for anything that goes down in value, whether it be cars, furniture whatever, and I only pay cash. I really don’t see the sense in making monthly payments for a car four years after I bought it, and it is worth less than half it’s value. Mortgage is a different story, because generally homes increase in value, but the trick is don’t by more house than you need, not more than you can afford. Big distinction. as for investments, I am 100% in dividend stocks & etf’s. I now hold 40% in large cap Canadian equities that pay a dividend and will be around long after Trump leaves this earth. I juice up my returns with covered calls etf’s on banks, utilities & reits. In the US I keep it very simple, by holding two indexes that pay a dividend, HDV & VGG. Those two indexes hold hundreds of quality equities that do business around the world, and I will let them worry about currency & political issues in China or India. I’m retired so it is all about income & KISS. I would be concerned about Trump more if I was an American, since he has companies around the world & the very real possibility of conflict of interest is so obvious. If you can’t get him to release his income tax returns, do you really think he is going to come clean on who is children ( acting on his behalf…supposedly) are dealing with in other countries.
Thanks for the details Brian.
You and I sound similar.
We bought more house than we need, 6-years ago, we knew that then, and we’ve enjoyed it to date. Our challenge today is what do we really need in the future? Our thoughts are changing, likely for the better, and we’re more cognizant of owning what we need vs. what we want.
It’s an interesting journey we’re on…I never thought this way before but it’s evolving, so I guess that’s fun.
re: investing. I think HDV is a nice US dividend ETF. I have it in my list in a post to come in a few weeks on my site.
“I now hold 40% in large cap Canadian equities that pay a dividend and will be around long after Trump leaves this earth.”
Funny comment 🙂
KISS concepts are great. I try to apply this in my life as much as possible.
You’re right. There’s not much else to do but stick to a well thought solid long term plan for investing. What may or may not happen under a Trump administration is very hard, if not impossible to tell. Rates are going to surprise many people over the coming years and not in a good way. It’s already started.
On your priorities:
1. Excellent. 4-5 years from now you’ll really be sitting pretty.
2. Emergency only such as losing a job. Yes.
3. Absolutely. Never in my life has it been different.
4. I love it. Cars paid for and a used car replacement in cash. Been the same here for many years.
I have really no idea what might happen. I do think my generator might come in handy for the apocalypse!
I take pride in the ol’ beater car, as long as it runs! Having a paid off house in 5 years will be nice but will need current jobs intact to do that.
No one knows. I’m enjoying reading all the speculation though.
I am wired for a generator but never got one since what we’d need costs a lot and after the cost/benefit analysis couldn’t justify it.
Nothing wrong with the beater and it seems you don’t need it a whole lot anyhow.
Yes, its important to keep jobs intact. I learned the hard way a few years past your age.
Thanks RBull. Our generator is a natural gas one, hard-wired/connected to house. Comes in handy now and again with power outages but those are rare. We really got it to back-up our sump pumps, furnace, etc.
I totally agree with you. I paid all my non-mortgage debt, and paying the maximum amount allowed biweekly to my mortgage. Investing as usual, and will stay the course no matter who the Presidents of countries.
Thanks for your comments. We aspire to stick to our plan and ignore the Trump drama.