Has your Investment Policy Changed After the US Election

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8Toretirement
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Has your Investment Policy Changed After the US Election

Post by 8Toretirement » 09 Nov 2016 14:28

Does this US election change your investment policy.

I gave some thought on the outcome of the US election on my portfolio. I can't see making a change, still running about 60% Bonds/GIC's/Cash to equities. Broad ETF exposure to world indexes with a large tilt to US value. Canadian exposure through FIE in TFSA and select stocks composing of NB, BNS, CAR, and AAR in RRSP's and TFSA's.

Not changing anything, not concerned about the markets as I expect to get the market return whatever that is.

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Re: Has your Investment Policy Changed After the US Election

Post by big easy » 09 Nov 2016 15:33

No, I still can't predict the future.
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Re: Has your Investment Policy Changed After the US Election

Post by Insomniac » 09 Nov 2016 15:40

No. I think I would only revisit my investment policy in the case of some big personal event. e.g. Pension is unexpectedly reduced, marriage breakup, etc.

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Re: Has your Investment Policy Changed After the US Election

Post by Flaccidsteele » 09 Nov 2016 15:50

big easy wrote:No, I still can't predict the future.
:thumbsup:
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Re: Has your Investment Policy Changed After the US Election

Post by Peculiar_Investor » 09 Nov 2016 18:41

8Toretirement wrote:Does this US election change your investment policy.
It didn't even cause me to review it, let alone change it. Why should it? Governments change on a regular basis, good companies and good investment strategies should for the most part be timeless.

If you investment policy is subject to review/change on political matters, did it change after the Brexit vote? The change in government in Canada?
Insomniac wrote:No. I think I would only revisit my investment policy in the case of some big personal event. e.g. Pension is unexpectedly reduced, marriage breakup, etc.
I agreed, personal life events are a reason to review and consider revisions.
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Re: Has your Investment Policy Changed After the US Election

Post by SkaSka » 10 Nov 2016 19:32

Nope. Never crossed my mind.

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Re: Has your Investment Policy Changed After the US Election

Post by Koogie » 10 Nov 2016 20:11

No but Mr. Trump has made me hopeful.

Hopeful for volatility, that is, and the opportunities that might ensue.
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Re: Has your Investment Policy Changed After the US Election

Post by Sensei » 12 Nov 2016 08:08

Hi,

A kind of lesson I've learned in the last few years is that investing as I do makes me different from many people. It often means ending old friendships. Relationships with relatives also change. Old friends and relatives are often financially illiterate people who have not thought about the future and have not cared to put aside and / or invest money for 'a rainy day' such as retirement. As such some actually look down upon me as some sort of kook. They just don't get it. Fundamentally, I have learned to keep my trap shut about money around most people because it often ignites ridicule and resentment or even engenders false expectations.

What is good for old friends is not necessarily good for me. Many of my British friends were devastated by the Brexit vote and many Americans took a day off to watch the election results come in and they were also crushed. (No Trump supporters around here.)

I was probably the only person in my circle of 20 or 30 colleagues who actually learned something important and amazing. The market didn't care. The political pundits, economists, and poll takers were completely wrong. The establishment represented by both Clinton and Trump have no idea of what people are thinking and experiencing, or if Trump tapped into it he has no intention of doing much about it. Moreover, if some of his policies are carried out, they will actually help me. Two of note are: reduction of corporate taxes and dismantling Obamacare (even though I support it).

I have guarded respect for our current Prime Minister. However, I'm not so stupid as to trust any politician or party. I put my faith in my research and the companies I choose. If I don't like my company anymore, the enter key can be pushed. Any politician can bite you in the you-know-where and from an investor's point of view, none are to be trusted or blindly supported, ever.

So, no, I haven't changed my plan because of the election. I agree investors* should change their strategies according to personal factors such as age, need for income, need for growth etc.

*Political considerations may be of some use to speculators. I consider some members of FWF to be speculators, and I have every respect for them, but we just don't do the same thing.
Cheers

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Re: Has your Investment Policy Changed After the US Election

Post by longinvest » 12 Nov 2016 08:24

I have not changed anything and I don't intend to.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 12 Nov 2016 08:27

My investment policy has not changed drastically but I do feel inclined to put and idle or new money into US equity index funds. I think Trump policies may lead to a flight of capital to the US in at least the 1st half of his mandate.
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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 12 Nov 2016 16:57

I have a relatively large chunk of money to invest early in the new year. The new money will make up 70% of my investment portfolio.

Don't want to try and time the market, but the likely volatility is a concern. I was planning to put the new money all at once on the basis that on average markets go up and this improves risk adjusted return expectation. Now I am wondering about splitting into five equal chunks and investing them at 2-monthly intervals.

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Re: Has your Investment Policy Changed After the US Election

Post by AltaRed » 12 Nov 2016 17:36

It is a crap shoot, but if you are likely to have more regret being too early in a declining market rather than missing out on a climbing market, then average into the market as you suggest (though 2 month intervals seems awfully quick). If you are going to time entry, I'd do it over the course of a year, perhaps once each quarter. Only hindsight will prove your decision right or wrong.

FWIW, I am of the type that meters cash investments into the market over a period of time. I don't recall whether I have won or lost overall on that approach and have never done the math to prove it one way or the other. No point in 20-20 hindsight after the horse has left the barn.
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Re: Has your Investment Policy Changed After the US Election

Post by Koogie » 12 Nov 2016 17:43

I believe (?) that it has been proven mathematically time and again lump sum investing beats dollar cost averaging. Time in the market and all that.

Still, I rarely have the cojones to do it.. :rofl:
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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 12 Nov 2016 18:00

AltaRed, Koogie - thanks. Yeah, I would have totally moved in had it not been for Trump. Things are bound to jump around.

Not sure there is a huge deal of difference between 4 chunks every quarter and 5 chunks every 2 months.

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Re: Has your Investment Policy Changed After the US Election

Post by longinvest » 12 Nov 2016 18:33

Mordko wrote:I have a relatively large chunk of money to invest early in the new year. The new money will make up 70% of my investment portfolio.

Don't want to try and time the market, but the likely volatility is a concern. I was planning to put the new money all at once on the basis that on average markets go up and this improves risk adjusted return expectation. Now I am wondering about splitting into five equal chunks and investing them at 2-monthly intervals.
Mordko,

It could be worrisome to invest big amounts of money. But, sometimes, the worry is an indication that we are taking more risk than we should. Getting a sizeable amount of money can represent a milestone in our quest for financial independence that deserves a revision of our chosen asset allocation.

I'm just suggesting that you consider revisiting your chosen asset allocation if your emotions are telling you that putting the new money all into your current allocation could lead to big losses. Even if you invested the money over a period of ten months, those same big losses could happen just after investing your last chunk.

Good luck!
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Re: Has your Investment Policy Changed After the US Election

Post by deaddog » 12 Nov 2016 18:41

Mordko wrote:

Don't want to try and time the market, but the likely volatility is a concern. I was planning to put the new money all at once on the basis that on average markets go up and this improves risk adjusted return expectation. Now I am wondering about splitting into five equal chunks and investing them at 2-monthly intervals.
Why not time the market?

When it comes time to deploy your capital see what the market is doing. If it is trending up then put your money in. If it is going down then wait for it to start going up.
Most of our so-called reasoning consists of finding arguments for going on believing as we already do.( J.H. Robinson)

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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 12 Nov 2016 19:49

longinvest wrote: Mordko,

It could be worrisome to invest big amounts of money. But, sometimes, the worry is an indication that we are taking more risk than we should. Getting a sizeable amount of money can represent a milestone in our quest for financial independence that deserves a revision of our chosen asset allocation.

I'm just suggesting that you consider revisiting your chosen asset allocation if your emotions are telling you that putting the new money all into your current allocation could lead to big losses. Even if you invested the money over a period of ten months, those same big losses could happen just after investing your last chunk.

Good luck!
Thanks longinvest,

I am happy with my asset allocation because of a very decent DB pension which takes the role of fixed income. The investment is all within ETFs, divided between different regions. In general it would have been my preference to put it all in as soon as possible. Was going to do it. My concern is specific to what's going on with politics right now. It's not something we've seen before, at least not recently.

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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 12 Nov 2016 19:53

deaddog wrote:
Why not time the market?

When it comes time to deploy your capital see what the market is doing. If it is trending up then put your money in. If it is going down then wait for it to start going up.
Thanks deaddog,

Momentum does work a lot of the time. As does contrarian investment. Different factors work well at different times and I don't trust my human emotions to evaluate situation neutrally and logically. So, I'd like to set up a plan a little bit in advance and stick to it mechanically, regardless of what the markets are doing on the day while they react to the latest midnight tweet from @realdonaldtrump.

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Re: Has your Investment Policy Changed After the US Election

Post by Sensei » 13 Nov 2016 01:45

Hi,

Mordko, my 2 cents and welcome to the Forum. It really depends on what you plan to buy and whether you want to 'invest' or 'speculate'. In my book invest means buy good companies and keep them as long as they meet your original investment objectives. Also, in my book, good companies provide growing and sustainable dividends.

It seems the thread of your thinking is that you are worried that your share purchases will go down in value even though you yourself said that the general trend of the market is up. Dividends, another form of return on your investment, rarely go down and mostly go up in a good company. I always take Geraldine Weiss's and Kelly Wright's thoughts to heart. Dividends don't lie. They either go into your account or they don't. Moreover, assuming I have cash, a down market is a happy time for me (and other dividend investors) since yields on high quality stocks go up. We can increase our dividend 'pay cheque'.

Strategically, you should also be thinking about diversification by sector, market cap, geography or whatever turns your crank. If I were you, I'd think of some stocks you really like and make a watchlist and, well, watch. Globeinvestor works well for this or perhaps your own broker site.

If you want to delve into some stocks with less of a history, then you need to learn some fundamental analysis. The more arcane the stock or investment is, the more you need to drill down. Maybe you know this already. Two very important things I've learned is to not forget historical dividend yields and historical stock prices for your stocks. Also, watch the debt.
Cheers

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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 13 Nov 2016 08:56

@Sensei - a dividend can "lie" like just about any financial instrument. In a low rate environment companies have been borrowing and doing share buybacks. They are putting money in one of your pockets while taking it out of the other.

My investment strategy is Couch Potato ETFs with a bit of a tilt towards small value (VBR) and EMs (VWO). In a way, it's a dividend strategy too. Like you say, it's diversified.

A downmarket would also be a "happy" time for me to buy. My specific concern is that Trump follows through on protectionist policies and that it will trigger a trade war and a world recession. Nothing is certain, there are other factors and I don't have crystal ball but surely the probability of a major plunge over the next 12 months has gone up.

If I were putting a few thousands here and there throughout the next 4 years, I'd be happy to buy as soon as possible. If the markets plunged I'd be happy to buy as soon as possible. The problem is that I will be in a position to invest a lump sum before Trump even assumes the office and gets to implement some of his brightest ideas.

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Re: Has your Investment Policy Changed After the US Election

Post by AltaRed » 13 Nov 2016 10:25

One good thought worth stressing from the above posts is to watch debt metric levels, e.g. D/E, D/CF, etc. Too many companies have been borrowing at low cost to keep their high profile 'equity' metrics looking good. The share prices of highly leveraged companies will (could) be thumped really hard with a significant rise in interest rates...and dividend growth could be stalled for multiple years.
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Re: Has your Investment Policy Changed After the US Election

Post by northbynorthwest » 13 Nov 2016 12:14

@Mordko We're in a similar situation as my spouse is also receiving a large amount.
My thinking at the moment is: one third right away, one third at Halloween 2017, and one third awaiting the next official correction of January 2016 proportions or greater, however long that takes. We are mainly individual stock investors not indexers so we may buy individual opportunities as we identify them, and if more $ is in place ahead of schedule, fine.

I've sometimes contemplated (but not initiated) a kind of fluid asset allocation that calls for being 10 % more conservative when markets are continuously setting new record highs and 10 % more aggressive when a correction/bear market is declared and blood-in-the-streets type news of market downturn is on front pages/topping newscasts. That thinking was inspired by a co-worker I didn't directly work with but could periodically overhear loudly celebrating how well his portfolio had just done, or moaning about the opposite. I was convinced I could come up with a pretty effective rules-based system of investing based on the reverse tack to his mood.
But for now, I'm just trying to stick to a garden variety AA-and-rebalance groove.

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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 13 Nov 2016 17:06

Seems like a good approach... Please let me know when your co-worker starts to moan.

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Re: Has your Investment Policy Changed After the US Election

Post by Peculiar_Investor » 15 Nov 2016 18:59

Regulars will know that Howard Marks and his memos get periodically mentioned on FWF. I happening to be checking for recent memos and found Go Figure! (PDF) that he posted yesterday.

My quick take-away to contribute to this topic is
Howard Marks wrote:Thus two key observations can be made based on last week’s developments:

• First, no one really knows what events are going to transpire.
• And second, no one knows what the market’s reaction to those events will be.

These observations reinforce my belief that it’s a mistake to base investment decisions on macro forecasts. But you knew that.
I'd concur.
Mordko wrote:I have a relatively large chunk of money to invest early in the new year. The new money will make up 70% of my investment portfolio.

Don't want to try and time the market, but the likely volatility is a concern. I was planning to put the new money all at once on the basis that on average markets go up and this improves risk adjusted return expectation. Now I am wondering about splitting into five equal chunks and investing them at 2-monthly intervals.
Mordko, might I suggest you read a previous topic, Best approach to deploying a large sum of money, and continue the discussion there.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 18 Nov 2016 20:31

Staying the course is almost always the smart thing to do but I'm starting to contemplate ways to protect my portfolio. I suspect optimism and flight to the US dollar will boost US markets for the next 6 to 12 months. However, in my estimation, the risk of serious sh*t hitting the fan has increased dramatically under the current U.S. regime and I'm a little surprised by the fairly lackadaisical attitude of the investment community. The list of risks of negative events that I feel may be increased are quite long:

- Russian aggression towards neighboring states with a possible takeover of the Ukraine.
- Internal strife in the US: mass protests, violence against protesters and law authorities, interracial violence, government corruption at the top levels, Trump or Republican vengeance against adversaries, appointment of judges likely to impose religious and social restrictions, lower and middle income people without sufficient health care, rights violations of certain minorities, increased gap between the rich and the poor, etc.
- International violence against American targets and citizens
- Efficient but high causality rate (of innocent civilians) military action by the US in the middle east.
- Destabilization of 2nd and 3rd world countries due to US policies causing increased poverty, violence and tendency for aggression against neighboring countries.
- A certain destabilization of Europe due to a weaker NATO and fears of an emboldened Russia.
- Rising inflation imported from the US caused by trade restrictions and debt levels.
- Possible trade wars.
- Possible defaults or attempts to renegotiate US debt.

Just to be clear, I'm not saying that any of the above will happen and nothing would make me happier than to be proven a fool for even suggesting such notions in 4 years from now. All I'm saying is that in my opinion the risk of such events have significantly increased. I have sold all my EM ETFs and raised a little more cash in my portfolio than is typical. I've raised my US holdings slightly for now but will review that in 6 months time. My hope is that Trump's concern about money overrides some of his aggressive and narcissistic tendencies resulting in a fairly healthy economy. I'm not going to do anything extremely drastic portfolio-wise but I am becoming a little more interested in capital preservation than appreciation.
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