As tensions rise between Canada and the US over tariffs and trade retaliation, investors are left wondering how to navigate this uncertain market landscape. Here are six dos and don’ts to help you make informed investment decisions.
Buy in corrections to power long-term gains
Consider investing in dips to buy into stocks at a lower price, as this can lead to better long-term returns than waiting for a steady rise. However, avoid using stock funds to meet near-term objectives due to the potential for short-term market volatility.
Avoid betting on sectors that will prosper or be crushed
Forecasting winners and losers in a trade war is challenging, and current trade tensions could resolve before too long. If you still want to bet for or against a sector, keep your exposure light, ideally under 5%.
Rebalance portfolio diversification
Review your stock and bond mix to ensure it aligns with your age, retirement goals, and risk tolerance. Aim for a balanced portfolio of 60% stocks and 40% bonds, divided evenly between Canadian, US, and international stocks.
Don’t dump U.S. exposure
Hold onto US stocks despite the uncertainty, as they can provide essential returns from companies dominating globally. Investing in AI and other tech breakthroughs also requires US content for long-term success.
Consider a small taste of crypto
If you’re open to speculative investments, consider adding a small portion of cryptocurrency (up to 3% allocation) to your portfolio, as pro money managers are starting to incorporate it into their portfolios. Keep in mind that crypto is highly volatile and should be approached with caution.
Avoid overcommitting to GICs
While Guaranteed Investment Certificates (GICs) can be a good partner for bonds, avoid overcommitting due to the potential for inflation and reduced liquidity during uncertain times. With rates reaching high 3%, their appeal has decreased.
Source: https://www.theglobeandmail.com/investing/markets/inside-the-market/article-a-half-dozen-tariff-fighting-ideas-for-your-investments-in-these