Every month, Stoic partner Freddy Forger writes a short column in FiscAlert, the magazine with the smartest tips for managing money — essential reading for financial advisers and tax professionals. If you don’t have a subscription, you 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 waste energy on things you can’t control. Taxes are one of them. They are constantly changing and no one knows in which direction. Anyone who bases their investment strategy on this is choosing for premeditated disappointment.
What are things you can influence? The costs you pay for your investments. Many active asset managers – managers who do engage in speculation and market timing – charge hefty fees, partly to pay for all those 'active' transactions. However, they do not structurally outperform the market. Besides, 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.
