Worried about tariffs and the impact on stocks? Why that could prove to be a costly mistake

Investors shouldn't worry too much about political or economic factors when making investment decisions.

| More on:
Man looking concerned head in hands at laptop

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The impact that tariffs and trade wars may have on the economy looks to be weighing on the markets of late. In the past three months, since the presidential election, there has been a lot of turbulence in the market with the S&P 500's gains over that stretch up around just 1%. President Trump has threatened multiple countries with tariffs, but there's still a lot of uncertainty as to how all that will play out.

However, investors don't need to get out of the market due to that uncertainty. It can be nerve-racking, and some stocks have been falling due to the potential havoc that tariffs could impose on their businesses. But selling your holdings and possibly getting out of the market because of this can prove to be a costly mistake, and here's why.

Government policies can be impossible to predict and shouldn't be a factor for long-term investors

When you're investing for the long haul, focusing on the bigger picture is of far greater importance while ignoring short-term disruptions like tariffs and policy changes.

Furthermore, predicting what the government may or may not do is difficult, if not impossible. After all, legislation can take time, and it can change from one administration to the next.

If you're investing in a business that may be so vulnerable to tariffs that they may cripple its ability to compete in the long run, endangering its long-term survival, that may be an important sign that perhaps that business isn't a good choice.

Billionaire investor Warren Buffett doesn't worry about economic trends and forecasts. He remains invested and has faith in the long-term growth of the economy.

In one of his annual letters, he wrote that "despite some severe interruptions, our country's economic progress has been breathtaking." Betting on the market and its long-term growth is something Buffett firmly believes in, and long-term investors would also be wise to focus on the bigger picture and not worry about what might happen with the economy in the next year or two.

Not sure what to invest in? Go with an exchange-traded fund

You might still be apprehensive about holding stocks you're not sure about. If so, there's an easy way to remain invested in the market without having to worry about picking individual stocks: hold an exchange-traded fund (ETF).

ETFs can drastically simplify investing for you and give you exposure to many stocks -- sometimes hundreds or even thousands -- through a single investment. That way, you won't depend on just one stock's performance, and you can still stand to benefit from the market's overall performance.

A good option for long-term investors is the Vanguard Growth ETF (NYSEMKT: VUG). The fund has a low expense ratio of 0.04% which means that fees won't have a big effect on your overall returns.

And the ETF will give you exposure to the top growth stocks in the country, including Tesla, Meta Platforms, Nvidia, and many others. There are around 180 stocks in the fund, with tech stocks accounting for 59% of all holdings.

There can be some risk with the ETF from one year to the next, especially given how volatile tech stocks can be sometimes. But over the long haul, this fund has trounced the S&P 500, achieving returns of nearly 300% over the past five years, while the broader index's gains are around 190%.

^SPX Chart ^SPX data by YCharts.

Investors should keep calm, and remain invested in the market

It can be worrisome to invest when there is economic or political uncertainty. But trying to time the market and pick the optimal moment to invest can be a costly strategy that doesn't pay off.

Instead, if you're not sure what to invest in, putting your money into an ETF like the Vanguard Growth Index can be a much safer option to consider. It may go down in the short term, but you can be fairly confident that in the long run, it'll rise in value.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Should you invest $1,000 in Bcal Diagnostics right now?

Before you buy Bcal Diagnostics shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Bcal Diagnostics wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

David Jagielski has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Nvidia, Tesla, and Vanguard Index Funds - Vanguard Growth ETF. The Motley Fool Australia has recommended Meta Platforms and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Robot humanoid using artificial intelligence on a laptop.
International Stock News

3 reasons Amazon stock looks like an incredible bargain right now

Here are three reasons Amazon stock looks like a rare bargain at current levels.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
International Stock News

Warren Buffett's $347 billion warning to Wall Street is ringing out loud and clear. History says this happens next.

Let's take a look.

Read more »

Warren Buffet
International Stock News

Warren Buffett nearly made his biggest investment since 2022. Here's what's holding him back.

Buffett said Berkshire came close to spending $10 billion, and he'd happily spend $100 billion.

Read more »

Happy man working on his laptop.
International Stock News

Here's why Amazon is a brilliant buy now (Hint: It's not e-commerce)

Fortunately for investors, cloud computing is going through a massive boom.

Read more »

A man looking at his laptop and thinking.
International Stock News

With Warren Buffett stepping down as CEO, will Berkshire Hathaway sell Apple stock?

Or will it find something else to invest in? Let's take a look.

Read more »

Man on his laptop standing next to data centres.
International Stock News

History says now is the time to buy Nvidia stock

History doesn't normally repeat itself, but it often rhymes.

Read more »

Woman relaxing and using her Apple device
International Stock News

16 words from Warren Buffett that should have Apple stock investors excited

Let's see what Buffett had to say and what it means for investors.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
International Stock News

Prediction: Warren Buffett may be shifting out of his Berkshire Hathaway CEO role, but he's not done investing

Let's take a closer look at what may be ahead.

Read more »