Every month, Stoic partner Freddy Forger writes a short column in FiscAlert, the magazine with the smartest tips for money matters and therefore required reading for financial advisors and tax experts. Those who do not have a subscription to FiscAlert can read the column here. This month, Freddy Forger explains why events such as US tax levies should not determine your investment policy.
Trump is considering imposing higher taxes on foreign investors for US stocks. Some investors see this as a reason to ignore US stocks. But that would eliminate more than 60% of the global stock market value in one fell swoop.
That is not rational. American companies such as Apple, Microsoft and Amazon represent innovation and productivity on a global scale. Adjusting your investment policy to this because of political noise is a form of market timing. Speculation, a euphemism for gambling.
The Stoics already knew it: don't spend energy on things you have no control over. Taxes are one of them. They are constantly changing and no one knows which way it will go. Anyone who bases their investment strategy on this is choosing for premeditated disappointment.
What do you have influence over? The costs you pay for your investments. Many active asset managers – managers who do engage in speculation and market timing – charge hefty fees, including to pay for all those 'active' transactions. But they do not structurally outperform the market. And the higher the costs, the less return remains.
My advice is simple: don't be distracted by political headlines or fiscal brainwaves. Keep investing globally. At low costs. And with a long breath. Boring? Certainly. But it does work. We can't make it easier. But we can make it more beautiful.
Door Freddy Forger
