The possible future president of the United States knows how to get what he wants. And he’s told us how.
In 1987, likely U.S. presidential nominee – and billionaire, and reality TV star – Donald Trump wrote a book called “The Art of the Deal.” In it, he outlined what he says are his 11 key negotiation strategies.
These aren’t quite investment tips… but they are strategies focused on improving investment outcomes. Here we focus on six of the tactics that Trump lays out that are most relevant to investors.
“I aim very high, and then I just keep pushing and pushing to get what I’m after. Sometimes I settle for less than I sought, but in most cases I still end up with what I want.”
Aiming high while investing can be a good idea, as long as it doesn’t lead you to take on too much risk. What we can learn from Trump’s tactic is to have investment goals – whether they’re long term, short term or something in between. Have a financial plan… and (Trump recommends) be ambitious.
Protect the downside and the upside will take care of itself
“I always go into the deal anticipating the worst. If you plan for the worst – if you can live with the worst – the good will always take care of itself.”
Investors should also plan for the worst-case scenario. The next economic crisis will be the one no one sees coming. You can protect the downside for your portfolio by:
- Diversifying – spreading risk around by investing in different asset classes.
- Limiting your borrowing – using too much leverage will only make any losses you have to deal with worse.
- Hedging – whether using cash, gold or a combination of other non-correlated assets.
Maximize the options
“I never get too attached to one deal or one approach…I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.”
You also shouldn’t get too attached to one stock or one asset class. If the investment is not working out, sell it and move on. If you like to own gold or real estate, learn more about other options, like the stock or bond markets. Then when gold loses its luster and real estate prices sink, you will be comfortable with some other types of investments.
Enhance your location
“Perhaps the most misunderstood concept in all of real estate is that the key to success is location, location, location… First of all, you don’t necessarily need the best location. What you need is the best deal.”
Real estate investors can take those words to heart. But so can stock market investors. Consider markets or stocks that are being overlooked by other investors, or avoided altogether. That’s often where you’ll find the most attractive investment opportunities.
You can also “enhance your location” by owning stocks outside your home market. It will provide some diversification and can help you earn better returns.
“In most cases I’m very easy to get along with. I’m very good to people who are good to me. But when people treat me badly or unfairly or try to take advantage of me, my general attitude, all my life, has been to fight back very hard.”
If you have been taken advantage of by a less than scrupulous investment advisor or personal banker, one option is – as Trump suggests – fighting back. One way to do this is to raise your complaint to the local financial services regulator. For Singapore, that’s the MAS, and in Hong Kong, it’s the SFC.
Contain the costs
“I believe in spending what you have to. But I also believe in not spending more than you should.”
Investing involves risks that are out of our control. We can limit them, but not eradicate them. But what we can control is costs.
One way to do this is to open a discount brokerage account – and save yourself the expense of a broker. (Click here for our guide to opening a brokerage account in Singapore, and here for the Hong Kong version.)
You can also keep your costs down by investing in low-cost index products. These products, including exchange traded funds and index funds, track a stock index like the STI or the Hang Seng. Plus, they perform better than most professional money managers – at a fraction of the cost. Saving money on investment fees is one of the easiest ways to boost your investment returns.
These strategies have served Trump well. Applied carefully, they’re mostly investment common sense.