Investing

Kill Your Television… and the Internet

By John Del Vecchio  |  September 4, 2019

So, tariffs are the big news today…

And, still, all the energy wasted dissecting trade wars wouldn’t power a tractor to raze a hill of beans.

Over time, a tariff war won’t matter much to your investment account. In fact, it won’t matter at all. So, why fret about it?

Here’s the truth. I can’t remember what the stock market returned on any September 3rd that I’ve been in this business. Not one single day is memorable. And September 3, 2019, won’t be either.

In my upcoming book, Unbounded Wealth, I talk about how news is hazardous to your investment account. One day, tariffs are on and the market tanks; the next day, there’s hope and the market rallies.

None of it really matters over time.

News has been proven to be hazardous to your health. It’s surely hazardous to your wealth, too.

Why Won’t the Tariffs Matter?

Well, the key ingredient to investment success is consistency. In past issues of The Rich Investor, I’ve shared simple strategies and techniques that have little to do with what’s going on in the world but play a key role in your ability to fund your retirement.

For example, the “30-Second Millionaire” strategy… Here you just buy a low-cost index fund periodically and you do it consistently. In fact, you do it on down market days. Over time, even with a below-average market return going forward, it won’t take much to walk away with well over $1 million.

In the book, I share a simple strategy based on two great philosophers. Isaac Newton found that an object in motion will remain in that state until acted upon by an external force. “Iron” Mike Tyson’s theory is that everyone has a plan until they get punched in the mouth.

I explain in greater detail in Unbounded Wealth. Suffice to say here, now, that it’s a simple approach to the market.

You buy the market when it’s in an uptrend. You sit out when the market is in a downtrend. And, if the Trade War destroys the world economy, the market will start to reflect that. It will do it before it becomes obvious. You won’t get out at the top. But your trend-following strategy will save your bacon in a bear market, big time.

Historical data show that, since 1970, by following the market trend, you get nearly identical results to being fully invested. But you incur much less risk.

Why is Risk Important?

It’s important because individual investors are terrible at allocating their assets after big losses. The lowest allocation ever to stocks was March 2009. That turned out to be a generational buying opportunity.

Tyson and Newton make a great pair. The combined strategy provides virtually the same as the market return but at a quarter of the risk. Over 50 years. Most of us can bear a 14% loss. Most of us can’t handle a 56% loss.

To that end, the Trade War means nothing. What matters most is finding an investment strategy compatible with your risk tolerance and sticking with it.

Ignore the news. Do something enjoyable with your life.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR