Advice – Earlybirds Invest

You should be skeptical

Every investment you make requires you to trust someone else with your hard-earned savings. That is the core of what Gardner is saying and why he believes every investor should be skeptical. That’s as true of investors checking out The Motley Fool as is it of investors buying exchange-traded funds (ETFs) or those buying Berkshire Hathaway (BRK.A -1.58%) (BRK.B -1.54%) stock.

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From a basic level, you need to ask about and understand what the person or entity is doing with your cash and why. But even more importantly, you need to trust that the person or entity that is investing on your behalf is doing so with your best interests at heart. Far too often on Wall Street, greed leads people to do things that are harmful to themselves or, sadly, others.

Are they eating their own cooking?

One of the best ways to figure out if you can trust someone is to invest alongside them. Basically, are they pitching you an investment idea they are also invested in? That’s where Buffett and Berkshire Hathaway provide a great example. Not only is Buffett the CEO of Berkshire Hathaway, but he’s also heavily invested in the stock himself. He’s not just managing your money, he’s managing his own money, too. (The Motley Fool recommends Berkshire Hathaway stock, by the way.)

What’s interesting here is that Berkshire Hathaway is a company, but it is operated kind of like a mutual fund. Technically called a conglomerate, Berkshire Hathaway owns about 180 businesses that do a lot of different things, from operating trains to building houses. And it also owns a portfolio of stocks that trade publicly, including Coca-Cola (KO -0.51%), American Express (AMX -0.08%), and Chevron (CVX -0.65%), among others.

But when you buy Berkshire Hathaway, effectively giving Buffett and his team your hard-earned cash to invest for you, you know he’s eating his own cooking, too. Like Gardner, Buffett has some advice for those who aren’t comfortable allowing others to invest for them: Just buy an index fund. Among the best options are funds that track the S&P 500 index (^GSPC -0.79%), which broadly represents the U.S. economy.

Essentially, just buy the market and keep on buying it until you find someone you are comfortable trusting with your savings. And if you never find that person, it’s OK. History suggests you will end up just fine if you keep buying the S&P 500 index.

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Trust is the name of the game on Wall Street

Most people have good intentions, so it isn’t like you need to assume everyone on Wall Street is trying to rip you off. And still you need to take the time to get to know and understand the people you are trusting with your money. Even after doing some due diligence, though, you might still want to tread lightly.

That could be as simple as taking an entry level subscription to a Motley Fool newsletter to get a feel for what is being offered or buying a few shares of a stock, mutual fund, or ETF to get you into the groove of what is backing the investment. And remember that one of the most important signs that your interests are aligned with the person handling your money is if they are investing your money along with their own.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool has a disclosure policy.

President Donald Trump had been touting the announcement of tariffs, which he said will restore America’s manufacturing base and improve the country’s economic security and standing over time. However, the stock market was still caught flat-footed by just how aggressive and expansive the tariffs Trump proposed on April 2 were.

Since then, stocks have suffered their sharpest sell-off since early in the COVID-19 pandemic, five years ago. As the market extends its weeks-long decline, many retirees are struggling as they watch their retirement accounts suffer rapid losses. Meanwhile, they may also be wondering how the now new tariff policies will impact their cost of living.

Here’s my advice to retirees looking for stability in this volatile market.

Move slowly to avoid making decisions you might regret

I can’t emphasize enough how fluid the tariff situation is.

The Trump administration says that tariffs and tax cuts will generate hundreds of billions of dollars in annual revenue while stimulating the economy for working-class Americans. That sounds good, in theory, but a dramatic pivot from established policy comes with near-term risks, such as higher prices, reduced consumer spending, and business headwinds.

Therefore, many aspects of this situation could change at any time. Countries could negotiate lower tariffs (or none), or Trump could pivot. Even if the new tariffs largely remain in place as announced, nobody knows for how long or precisely what impact they will have on the economy. While I don’t want to oversimplify this, it’s like an experiment with wide-ranging potential outcomes. With so much uncertainty, the market is spooked, which explains the S&P 500‘s 10.5% sell-off on April 3 and 4.

Those market sessions were ugly, but it’s also just two days. The worst mistake would be taking drastic action only for the situation to de-escalate. In this situation, it’s probably wise to move slowly.

Check up on your finances and your investment strategy

At the same time, you shouldn’t ignore the situation. So instead of rushing to action, take this opportunity to evaluate your finances and your nest egg.

Prolonged tariffs could increase prices for goods and services, so you may want to look at how that would impact your living expenses. Consider how tariffs might affect your purchasing decisions. If you’re in the market for a new vehicle, for example, you can look into which companies the tariffs will impact the most.

A pen, a pile of financial paperwork, some paper currency and coins, and a calculator reading Tariffs.

Image source: Getty Images.

Additionally, conduct a checkup on your investment portfolio. Review what you own and decide whether you’re taking more risk than you’re comfortable with. Diversifying your portfolio is about more than just owning lots of stocks. A retiree’s portfolio might include a mix of exchange-traded funds (ETFs), stocks, bonds, real estate investment trusts, international mutual funds, and hard assets like gold.

Again, you don’t want to act rashly, but reevaluating your portfolio with a focus on risk management can help you prepare for whatever happens. Your goal in retirement is to protect and preserve your wealth, not necessarily to maximize your investment returns. That goes double in such a volatile market. If you’re feeling stuck, don’t hesitate to consult a professional financial advisor to help formulate a personalized plan.

Steady the ship, then look for opportunities

I’ll repeat: Your top priority is getting your financial house in order.

Once you feel you have a handle on your financial situation, you may want to seek out opportunities. Could the markets continue to decline from here? Absolutely. However, I wouldn’t try to predict how long or how much. History has shown stock market downturns happen, but the market has always recovered and seen brighter days.

This time, it’s fears over tariffs and a trade war. But as a retiree, you can probably remember how scary the various recessions, wars, and other crises throughout your lifetime felt in the moment. Yet in hindsight, they ended up being excellent buying opportunities. This will likely prove to be a similar situation, and you can act on it according to your risk tolerance and budget.