Stop Doing Stupid Stuff

There was an article in a financial advisor trade publication a few days ago about some horrifyingly dumb decisions some investors made after the election in November. If you recall, there was a common theme in the media leading up to the election that if Donald Trump won, the markets would crash and the economy would fall off a cliff. So in attempt to outsmart everyone else upon news of the election, some investors (millennials in particular) rushed into exchange traded funds such as "Direxion Daily Junior Gold Miners Index Bull 3x Shares" and "ProShares Ultra VIX Short-Term Futures". They were betting on the success of traditional safe havens, such as gold, and anticipating massive volatility amid the inevitable sell-off. Well, that didn't happen. Gold has fallen by more than 10% since November 8th and the S&P 500 has gained more than 5%. Those are huge moves for such a short period of time.

Leave politics at the door when reading this. I am not saying that Donald Trump is going to be great for the economy. Things may very well be terrible in the upcoming four years. Or they'll be great. Or they'll be mediocre. I don't know. You don't know. Even if the economy is great or mediocre or terrible, how will that impact the stock market? I could venture a guess but ultimately, I don't know. Making complete changes to an investment portfolio based upon a guess to this question is gambling. If I wanted to gamble, I would go to Vegas. It's a lot more fun than an E-Trade account.

The one thing I am saying is it is a terrible idea for an investor to make large changes in an investment plan based upon short-term fear or speculation. In the grand scheme of your life and a long-term time horizon, the Trump presidency will be a paragraph among many others. Know your risk tolerance and stick to it. Want to get a your unique "risk number?" Check out the questionnaire on this link and I'll shoot it over to you. It helps put things in perspective.

If your friends were among those buying triple-leveraged funds the morning after the election, give them a hug. Then tell them to stop doing stupid stuff.

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