Liberate Yourself. From Bad Outcomes
Small choices can lead to massive change.
With the NASDAQ falling by more than -17% year-to-date, it’s hard for Americans to feel liberated from anything other than their capital gains. The implementation of reciprocal tariffs on April 2nd, aka ‘Liberation Day’, has triggered a new wave of US equity selling and subsequent retail investor panic.
One should note that the selloff began after trading hours, mostly impacting futures markets, mid-announcement speech. The fingerprints of institutional trading algorithms are all over this one. Nonetheless, a hot ember was placed into the kindling. Fearful small investors have predictably taken the bait, setting their financial houses on fire to avoid any upcoming repair bills.
Small, seemingly innocuous changes can have outsized impacts on your life. The most current application of this is principal is the act of abruptly changing your long-term capital strategy in response to short-term volatility.
Unless you have direct influence over the Executive branch of the United States government, there’s absolutely nothing you can do about any of this tariff noise. Liquidating your long-term investments to buy some sense of control only secures a temporary illusion and a folding chair on the sidelines.
I’ve been asked many times this year what investors should do in response to aggressive shifts in trade policy and Federal spending, and my response is: reassess your financial plan and align your portfolio using a sensible allocation, then stick with it. Accept that you cannot control markets.
I do have good news. There are many aspects of your life you can control, most of which are much more consequential than tariffs and their temporary impact on your 401(k) balance.
It’s just a bummer that harnessing these aspects with positive effect requires discipline and work. Zeroing in on your (passive) investments as the one thing you should improve to put your life on the good track sounds so much easier.
Too bad it’s a fool’s errand. You cannot predicably improve your investment performance by timing trades any more than you can safely run across a highway blind folded. Good luck with that, because luck is all you have.
Better to control the things you can. One small change I made in my own life that has had a massive benefit is simply going to sleep 50 minutes earlier. I used to stay up to midnight most nights exercising my right to consume media.
“It’s my time to unwind”, I would tell myself. Irony is, I ‘needed’ that time to unwind because I was stressed about the things I had not accomplished due to lack of energy and focus.
Earlier this week, I was meeting with a client and discovered she had a near-term goal she didn’t think it was realistic. After a quick review of her plan, we discovered that a small shift in her employer plan contribution strategy would free up the necessary cash flow to fund this goal in five years!
The decision to eat healthy is nothing more than a series of small choices you make throughout the day. The collective impacts of these decisions go far beyond the obvious financial consequences.
We call this the butterfly effect: a butterfly flaps its wings, and it sets off a series of events that cumulate into a hurricane on the other side of the planet. This is hyperbole, of course, but you get the point. This effect is quite real, with the potential to amplify your minute-to-minute actions in profound ways.
It is a challenge to dial in on your intentions with such focus that choice becomes easy, but I think it’s the right kind of problem to concern yourself with. Frantic consumption of volatile market data that is out of your control is a distraction. Focusing on it is not likely to help in any meaningful way.
You might think, “Well Ben, easy for you to say, I just watched my portfolio drop umpteen thousands of dollars! How does this NOT impact me?” To which I reply, “just wait”.
In fact, I’ll go one step further. Each time your thoughts begin to dwell on the market correction, shift your focus to accomplish something on your list of to-dos. Preferably, something you’ve been procrastinating that you know would improve your life when done.
Perhaps, one of those things is to finally sit down with a financial planner to thoughtfully define a purpose for your wealth and income. A butterfly must first flap her wings to initiate change.
In any case, we can revisit your situation in a year after following this suggestion, and if things have not improved then I will take down this post and proclaim you were right.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
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