Whether you love or hate Trump, emotions are running high, and emotional decisions are the enemy of investing excellence. While we have never seen anything like this specific situation, over the past 125 years, the markets have come back from terrorist attacks, world wars, pandemics, presidential resignations and even the last time a president tried to implement tariffs this dramatically.

While we will have to wait and see how this plays out, I’d hate for you to make one or more of these eight investing mistakes that could create additional financial stress and pain during this difficult time. While I am there with you, wondering what the future holds, I am confident that the greatest companies will continue to find ways to make money. Perhaps they will make less or work harder to make those record profits they’ve seen the past few years, but they will make money. Investing in these companies is the best way to stay ahead of inflation (more is coming due to tariffs) and grow your wealth over time.

Stopping Or Slowing Contributions To Retirement Accounts

Stopping contributions to your retirement account is something you will likely regret. Your potential for above-average returns increases when the markets are scary. Once you’ve stopped making retirement plan contributions (think 401(k), Roth IRA, SEP-IRA or even Cash Balance Plan), there will never be a perfect time to start investing again.

Skipping 401(k) contributions could quickly turn into a million-dollar mistake for the average worker, just from missing out on employer matching. This is essentially free money from your employer that you may miss out on if you skip contributions.

Lastly, if you miss out on pre-tax contributions to your retirement account, you could see your tax bill jump as your taxable income jumps (after missing out on the tax deductions for contributions to the 401(k)). The increased taxes could outweigh what should be a temporary drop in the stock market.

I’m based in California, where the top tax rate (state and federal combined) tops 50%. I am optimistic that we won’t see that big of a dip in stock market values unless they try to make this tariff/trade war bigger than the huge mess we are currently seeing.

Selling Stocks With Big Gains

I’m not saying you should sell stock with gains, but you need to answer two questions (at least) before selling. 1. Is this a stock you still want to own? 2. What are the tax implications of selling this stock?

Let me use Tesla stock as an example. It is down over 40% off its peak value (as of writing this post). Its value is around where it was in 2020, but the value is up substantially from one year ago. Many owners of the stock are still sitting on substantial capital gains.

Think about whether you still want to own your individual stock. If you are appalled by Elon Musk and DOGE, you may be compelled to sell this stock regardless of tax consequences. Alternatively, I know many financial advisors I speak with who love Musk, have recently purchased new Teslas and are piling into the stock.

Even if you are determined to sell your Tesla stock, be aware of the tax consequences. You could get hit with 15-20% federal capital gains taxes with more taxes at the state level. Additionally, if your income is above $200,000 (single) and $250,000 (married), you could get hit with Net Invest Income Tax (NIIT), which adds another 3.8% to your tax bill.

The choice around Tesla stock buys/sells may be politically charged. I’m going to guess the average investor doesn’t feel quite as strongly about your average large-cap ETF fund beyond wondering if it will make them money in the future and how much taxes they will own on future gains in the ETF.

Ignoring Tax Loss Harvesting Strategies

If you know me, you know I love tax planning. Saving money on taxes can be the difference between running out of money in retirement and living a fabulous lifestyle. Tax loss harvesting is a great way to capture tax savings when stock markets get scary (like the past few weeks). Tax loss harvesting is a great way to increase your net after-tax returns on your investments without incurring any additional stock market risk.

Substantial stock market returns are great. However, I get the most thanks from clients when I save them money on taxes, and tax loss harvesting is often a nice way to surprise and delight them with money saved on taxes today.

Not Being Properly Diversified

Wow, we have gone from the Trump bump in stocks to the Trump tariffs pushing the stock market off a cliff. Even the most Maga-loving people in my world are getting a bit pessimistic. I just keep picturing Parker Posey (via “The White Lotus” Season 3) yelling “Donald, NOOOOOOOOOO!!!!!” in her best southern accent.

The only bright side I can find if I’m trying to polish the turd we have been handed, is that those with a well-diversified multi-national portfolio are likely to fair a bit better than those with more concentrated US stock positions. A combination of domestic and international stocks and bonds in your portfolio is called diversification. There is no guarantee that diversification will eliminate stock market pain; it can help reduce the pain in many scenarios.

Investors benefitted from investing in many international stock markets in Europe, Latin America and Asia in the first quarter. However, stocks in those regions have been hit by the worldwide market declines lately as the perceived potential for extreme global damage from tariffs has smacked us in the face. Since Trump announced his huge tariffs, many international indexes have dropped far less than US-based indexes in the past few days.

Since we are talking tariffs, some countries will fare better than others under the Trump tariffs. At this point, your guess regarding which countries will fare better is as good as mine. Hence, staying diversified, or getting diversified if you aren’t already, is a wise investing move for the future.

Not Rebalancing On A Regular Schedule

Since I started as a financial advisor more than 20 years ago, the need for portfolio rebalancing has been drilled into me. This lesson really paid off during the financial crisis. Stock market losses were still painful (they always are), but they were much smaller for people who had diversified portfolios that they rebalanced on a regular basis, typically annually, sometimes more, sometimes less, depending on the account and investments.

However, rebalancing is one of the most counterintuitive pieces of investment advice, which can lead many people to skip it. What is rebalancing? You sell off parts of your portfolio that have been the best performers to buy more of the parts of your portfolio that have recently underperformed. If an investment has outperformed, it is more likely to be overvalued. Similarly, an underperforming sector or market is more likely to be undervalued.

Without setting up automatic rebalancing or having a fiducial financial planner forcing you to, many people who own investments skip or ignore rebalancing. Recently, we have seen the most dramatic outperformance concentrated in just a few stocks; I’m sure many people reading this are overly invested in the Magnificent Seven and the household names this moniker represents. We are talking about Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla. Even if you don’t hold these stocks directly, they are included in many ETFs of mutual funds you may own. They may even dominate some or all of your funds.

Going To All Cash

Anytime you think about going to all cash, ask yourself, “How will this help me reach my financial goals?” When the economy is scary, a case can be made to increase your cash on hand to weather a downturn. However, selling all your investments will almost never be a good idea.

In the best-case scenario, you guess right and sell out before the market drops. You may be feeling great for a bit. Then the market goes up, and it keeps going up, and you end up buying back into the markets again in at some point in the future, buying at higher prices than when your sold out of the market. Likely losing money in the process. To time the market, you have to guess right twice, both when to sell and when to buy. No one has been able to consistently do this over time.

If the market drops, you will likely get scared, hence the motivation to go to cash. Essentially, you are just locking in your losses. Then, you will buy back in when the market appears rosier, completing a cycle of selling low and buying high.

Many times, someone will go to cash without taking taxes into account and end up owing 20-30% in taxes, which is money that is gone and not available to help you continue building wealth. Not to mention, 20-30% is typically bigger than most stock market corrections.

Some people never feel it is time to get back into the market after selling and leaving. I’ve spoken with people who still aren’t fully back in the market correction that happened during Trump’s first term due to COVID. Some people are still out of the market due to the great financial crisis.

Forgetting Now Is A Great Time To Do Roth Conversions

If you have been thinking about doing Roth conversions, the best time to do them is when the stock market is down. Roth conversion is a great tax strategy to increase your tax-free income in retirement.

In case you were wondering, I do expect taxes to be higher in the future. You can think of the current budget deficits and national debt as a tax on your children and younger Americans. Eventually, the bill will come due. The matter is when and how drastic the changes will be.

Assuming This Time Is Different?

If this time is different, we will need to course-correct our lifestyle choices and spending. However, regardless of who is in the White House and how much I love or am pained by them, I am confident in the ability of the greatest companies in the world to make money. People will keep spending and spending because they have to (essentials like food and shelter) or because they can’t help themselves.

Nobody knows how the current ridiculously self-inflicted market chaos will abate or what it will mean for the global economy. Hopefully, you are working with an amazing financial planning professional who has helped you create a long-term roadmap, one that’s driven heavily by a well-diversified portfolio investing in the greatest companies from around the world, to reach all your financial goals. These strategies have always worked in the past; I am optimistic they will continue to work in the future.

The economy can’t be forecast, and nobody has figured out how to accurately and repeatedly time the stock market. Our best plan for financial freedom is to just ride this out together. The worse the market sell-off is, the greater the odds of above-average returns going forward, a lesson learned the hard way by many during the dot-com bust, 9/11, the Great Financial Crisis, COVID and many other stock market crises.