Trump-proofing my nest egg

In My Humble Opinion
1

Saw the 401K thread, but since I don’t have a 401K or any sort of pension, figured I’d delurk and start a new thread here.

I inherited a substantial amount of stocks from my late mother (along with some real estate, but I’ll leave that out of this post). The good news is that the buy dates, aka the cost basis of each holding, reverted to her death date and not the original purchase date. I am also past the 365 day short term capital gains restriction. Last decade she worked with her broker to reconstitute her holdings into very stable low-risk/low-reward items. Having checked each it indeed showed that they had not gone up collectively since her death date, and in fact the subtotal showed a slight decline.

So I should be able to sell all of them without having to worry about a big capital gains hit. There ARE some others which did go up significantly and are at all-time highs, so I could just eat the resulting tax bill on them, or wait until early January and sell less than the 47K capital gains cutoff for next year (alas I found out that, unlike normal taxes, c.g. are NOT progressive, so if I am just below the cutoff I’ll owe nothing, but if I sneak over said threshold the 15% will then apply to ALL that I sold).

I am of course worried about a market crash next year, which if Sir Shithead stays his course as he heads for the rocks may very well come to pass. The only bright spot maybe is that his protectionist tariffs may also protect the value of the dollar, but any research I attempt on this is polluted by idiot bloggers and sites whose authors may have axes to grind.

I also was, before the election, wanting to buy a house, but if a recession happens then housing prices may drop like a rock as well. So is it safe to sell a lot of my holdings, keep them in cash, await the inevitable fallout, then buy in the valley (house AND some new stocks)?

2

Housing market will vary by location.

Some areas the prices won’t drop much. There is an actual shortage of houses and townhouses in NJ as an example. But Florida and Texas are a pair of states with a growing surplus, these states could see a large drop in a recession or major downturn. So do some due diligence based on where you’re looking for a home.

Just to add to the fun, states like California have areas that could go either way.

As to investments, a solid and highly recommended plan is to have a 2 year cushion but keep long term investment strategies going. The market will rise again unless the country is broken beyond repair and then our nest eggs probably aren’t a high concern.

Now having a 2 year cushion can be very hard in itself.

3

After Trump was elected in 2016, I moved a substantial amount of retirement account funds into money markets in anticipation of the stock market crashing. Since the market actually did relatively well during his term, that ended up costing me money.

It’s true that he’s older and crazier now and his tariff plan if enacted would substantially hurt the economy, but I’d be careful about selling off stocks without seeking professional advice first.

Remember that Wall St. investors operate under their own peculiar “logic” (there already was a short-term boost in stock prices based on the election result).

4

I agree that talking to a licensed financial advisor is a good idea before making any big moves, but of course I have no idea how much money we’re talking about here. I meet with my FA once a quarter to discuss market changes and make adjustments as appropriate. I’m a relatively conservative investor, and I own my house, so I’m not worried about a temporary downturn in the market. I’ve been riding the ups and downs in the market for the past 40 years. However, if you need the money to buy a house next year, liquidating some or all of it is probably in the cards no matter what.

5

That isn’t exactly true, it’s just that the 0% capital gains bracket is fairly easily met by normal income. But if normal income is low enough, you can enjoy some of the 0% bracket. To illustrate, play with this calculator. For instance, using the 2024 tax year and filing status as single, enter $20K as wage income and $100K as capital gains. You will see that a fair amount of the CG tax is at 0%. Increase the wage income by $10K, and you’ll see how that affects the CG tax. Keep increasing the wage income and then yes, you will effectively lose access to the 0% rate. It is progressive, but fairly easy to exceed the income level where none of the CG is taxed at 0%. If you are married filing jointly, it improves a bit

6

Even that is not going to help much. No one knows what the stock market is going to do. Even big boy investment bankers have a hard time beating the market on a consistent basis.

Your best bet is to invest in a broadly diversified group of uncorrelated investments. Think total market index funds, total bond funds, treasuries, total international funds, and cash instruments (cd’s, money market funds, etc.). The exact amount to keep in each will depend on your risk tolerance, but something like 25% total stock, 25% international, 30% mix of total bond and treasuries, and 20% cash is fairly conservative and fairly safe.

7

Last post is good.

You cannot Trump proof your nest egg. While he is likely to damage markets, we cannot know in advance which ones.

8

I’d need to check it a bit deeper but IPRP looks fairly promising at a glance. European REITs.

A European defense fund might also be worth looking at.

9

I’ve been thinking that there may be NO safe refuge in the face of any of the possible upcoming insanity. The gold thread has shown that that particular metal may not be any sort of safe haven.

10

This is really it. The only Trump proofing is to have a long term plan and to stick with it. Hopefully that includes some diversification with asset classes that are not tightly correlated to each other. And through income or buffer built in the ability to wait out a drop if it happens.

11

FWIW it’s fun looking back at what all thought back when Trump term one was starting!

12

what a really interesting thread. Lots of fear that turned out not to be warranted. Your previous post is the best you can do. Pick an asset allocation you can live with and don’t deviate based on your nebulous feelings of what is going to happen. A cash buffer is not always practical for those living paycheck to paycheck, but it is nice to have when the markets go sideways and you don’t have to draw from your investments when they are down.

13

Wouldn’t their advice be affected by their political beliefs, assuming they’re sincerely held? Is there any way to account for that?

(Oop, sorry for the bump; this was linked from another thread and I didn’t pay attention.)

14

I didn’t post in that thread.

I did invest in volatility and I did well.

That said, I’m not confident in it this time around. At least, not yet.

15

Hard for most of us more average investors to play volatility well. We just don’t know how. I hadn’t listed it that time but I had then also bought a small bit of the volatility index, VIX, thinking it was an insurance move? If a huge drop it would spike? Then I’d throw that into the crashed equity funds. Turns out volatility is itself quite volatile! I could have made something if I was speculating in and out in and out, but for a set it and leave it person like me it was an insurance policy that didn’t need to make a pay out. Thankfully.

Care to educate on how you successfully played volatility?

16

yes, I would like to know this also. Sounds like it’s not possible, frankly, but I’ll willing to learn.

17

If you look back over SVXY - an inverse volatility index - the market was gung-ho for stable business growth from lower taxes, deregulation, etc. starting from election day 2016 and continuing to 2018, when the Trade War was announced. During that time period, there was roughly 3.5x growth in SVXY.

From there, we had roughly two years of flatness, as the market roiled around between de-regulation optimism tempered by Trump-craziness pessimism when the pandemic hit the markets in February.

Through most of 2020, we were coming to grips with the pandemic, the Presidential election was underway, and Joe Biden was coming in to campaign while Trump had people out trying to convince people that a 3% death rate on a population of 300,000,000 (also known as 1,000,000 dead) isn’t a big deal, telling us to mask up, and telling us to go maskless - and otherwise being plainly incompetent, disorganized, and lacking of any central message. SVXY moved from a low of 16 to eventually come back to around 30 as Biden won the Presidency and restored the country to a fairly normal order of operations.

I believe that I encountered SVXY sometime in 2019, deduced much of the above, put it on a watch list, and purchased after it dropped in 2020. I sold at around 28 figuring that it’s not the sort of thing that you want to hold long given how wildly it can move.

On average, the world leans against volatility. Markets hate it and money flows to stop it. That can take time but it is the average. A volatility index, on average, constantly reduces in value.

SVXY - as an inverse - probably should grow on average. But I’d take that whatever they’re doing to finance it costs so much that it’s difficult to do that steadily minus an amount of crazy optimism (emphasis on crazy). It ends up being relatively flat, cycling between long periods of (generally) slow growth with fast drop-offs that bring it back to flat.

It’s not one that I’d rest my child’s college fund on. You’re basically gambling that you’ll have a long period of stability - which the real world doesn’t ever allow for. So it’s like seeing how many times you can flip heads in a row. But…being relatively flat…if there is a crash you could probably wait it out until the next growth period and save yourself eventually. It’s not a given that you’re doomed.

Personally, I’m not confident enough to invest into a straight volatility index, since they shrink so steadily and mistiming could really screw you. There’s someone willing to risk it, and they might do well over a period of days and weeks, but I’m okay with missing out on that.

18

So if I understand, and please correct me if I don’t, you watched for volatility to increase, and then bet on it dropping?

The cautions on those etfs are eyebrow raising … “Intended for short-term use; investors should actively manage and monitor their investments, as frequently as daily.” Yeah the likes of me should stay away!

19

The Mrs. suggested we keep a bunch of our egg in large cap index funds because, to paraphrase, “All of Trump’s buddies have tons of dough in those companies.”

I don’t normally buy into timing the market, but I kind of agree with her thought process.

20

I.e., I watched for panic to turn to calm.

But yeah, for the moment, I’m migrating over to things like IPKW, EWL, FLAU, etc.