Welcome to Amygdala Mail, where I answer your questions about finances and money.
Published at 7:00 a.m.
Now that the tree is dismantled or pulverized, there are no more bubbles left in the fridge, and we’re waiting to see if Donald Trump is going to make us fry with garlic, cook in the oven or just spend a few seconds in the microwave, that gives us time to think about our life choices for 2025.
Speaking of Trump, Gabrielle has a question. “Do you think it is relevant to invest in a crypto ETF or in gold before Trump comes to power? »
The answer is no. Billions of people have known for two months that Trump will return to power. The market has already incorporated this into its prices.
It also doesn’t tell us anything about the future prices of gold and cryptos. During the first Trump administration, stocks had a return 50% higher than that of gold. It could happen again. Or not. Nobody knows.
As for cryptocurrencies, they have not yet proven that they are anything other than a vehicle for speculation. A week after the launch of the iPhone, people around me could no longer live without it. Sixteen years after the launch of bitcoin, no one around me uses it or wants to use it. Maybe that will change. Maybe not.
Your real question is: should we make investment decisions based on current events? This approach generally destroys wealth.
Our financial goals should not depend on what gold or crypto prices do this year. If so, they need to be changed.
Let’s continue with François, who wants to avoid a repeat of the 2000-2010 decade in his investments. “After the last 15 years of good growth, there could be another “lost decade,” he writes. And my retirement is approaching! In about 15 years. »
The lost decade is a myth, François. Yes, the 2000-2010 period was negative for US stocks (-9% in total). But it was excellent for Canadian stocks (+141%) and generally positive internationally.
When I talk about the importance of diversifying your investments in Canada, the United States, developed countries and emerging countries, it’s this decade that comes to mind. Having your eggs in several baskets is good for both reducing risk and capturing growth.
Since we don’t know which region of the world will outperform in the coming years, it’s better to be invested everywhere.
Especially since the markets have a way of laughing at us. We have forgotten it today, but in 2010, after a decade of crises, essentially no one wanted American stocks in their investments…
-By the way, François, if you are 50 years old, your investment horizon for retirement is not 15 years, but 40 or 45 years… We do not liquidate our assets the day we stop working. We are investors for life.
Next, let’s make room for Marcel, who would like to know if we should be worried about what Warren Buffett is doing.
“Warren Buffett sold shares of Apple and it appears he is keeping a lot more cash than usual. Is this a sign that a decline is coming? I considered that my investments had increased recently…”
Following what Warren Buffett does can be interesting. But he is in a completely different universe from ours.
Warren Buffett manages a $1 trillion conglomerate that employs 400,000 people. He keeps cash for contingencies like trying to buy big companies. Not to synchronize with the markets.
Here’s what Buffett said in 2023 when a shareholder asked him where the market was going. “We don’t have a clue where the stock market will be next week, next month or next year. We never talk about it. » It’s difficult to be more direct.
Finally, Manon has a question about investments for people who are at the start of retirement. “What proportion of stocks and bonds should I choose in Vanguard funds, for example, knowing that the horizon of 60-year-olds is not that of 25-year-olds? ”, she asks.
You will like my answer, Manon. In my mind, 60 is pretty young.
As I said above, a 60 year old person could still have 30 or 35 years in the financial markets.
In 35 years, prices will be much higher than today. So the person who invests in a GIC, for example, will become poorer. This is why investing part of your assets in the stock market is necessary.
In his book The Little Book of Common Sense InvestingJohn Bogle, founder of the investment fund firm Vanguard, writes that retired investors can aim for an allocation of 60% stocks, 40% bonds for younger retirees, and 50/50 for older retirees. older retirees.
At age 87, two years before his death, his own portfolio contained 50% stocks and 50% bonds. “I am comfortable with this allocation,” Bogle wrote. But I confess that half the time I worry about having too much stock, and the other half the time I worry about not having enough… We are all human, we move forward in a fog of ignorance, and we rely on our common sense to establish a balance in our asset allocation. »
To get a professional’s opinion, I recommend that you contact a fee-based financial planner. A neutral person, who will not sell you any financial products, and who can provide you with professional planning. It usually costs a few thousand dollars. A godsend for sleeping in peace.
Related News :