How to Position Your Portfolio Before the Election, Ep #120

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By Financial Symmetry, Chad Smith, and Mike Eklund. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

Every 4 years it happens: an election comes along and threatens everything. Or so it seems.

Video recap: https://youtu.be/7SkvyKEXH6s

Regardless of how you feel about the candidates, we’re here to discourage you from making fear-based financial moves. Learn how to overcome your emotions so that you don’t derail your careful long-term investment strategy.

The media won’t help you achieve your financial goals

It’s hard to get away from the drama of the election coverage. It’s everywhere you look: on the TV, in the newspapers, and even from the notifications on your phone. This kind of round the clock, in your face news coverage can heighten your anxiety about the state of the world and even make you worry about your investments. It is important to remember that the media is not there to help you. Its goal is to sell advertising, not to help you achieve your financial goals.

While 2016 may seem like a distant memory, many investors were concerned at the time that a Trump victory would surely tank the stock market. We fielded a lot of calls leading up to the 2016 election discussing if a more conservative approach should be taken, at least until we had more certainty.

While Trump’s victory was a surprise to many 4 years ago, it certainly was not devastating for the stock market. In fact, the S&P 500 with dividends returned 21.83% in the following calendar year of 2017.

Investors who moved into cash to await more clarity would have swiftly regretted their decision. Check out the chart linked below which shows annualized returns for each president dating back to 1969 with the red and blue bars depicting results for Republicans and Democrats.

www.financialsymmetry.com/how-should-i-position-my-portfolio-before-the-election

How to stay focused on long-term financial results during an election year

Staying focused on your long-term financial goals can be a challenge when the short-term seems so uncertain. People often feel tempted to time the market when the world feels up in the air. It’s important to remember that the market is influenced by many other events, not solely the election. So even if it seems that the election is the only thing going on, you need to stay focused on your long-term financial goals, stick with your investment plan, and avoid market timing.

Focus on the facts to help you through uncertainty

One way to help you stay focused on your long-term financial goals is by looking at the facts. If you were thinking that this might be a good year to sit out the stock market, you may want to think again. On average, the stock market return in an election year is 11%, which is well above average.

Another surprising fact is that it doesn’t matter to your portfolio who is in the White House. There is actually no correlation between stock market performance and which party leads the country. Listen in to find out which two presidents saw the same economic growth during their first three years in the Oval Office, the answer will surprise you.

Focus on what you can control

In investing, there are many factors that are beyond your control. However, that does not mean that your entire financial life is uncontrollable. Actually, the factors that you can control have a lot more to do with your financial success than which investments you choose. Think about all you can control: your cash flow, when you need money, when you stop earning income, what your income sources in retirement will be, how you pay for healthcare, and your estate planning. These controllables are much more important to your financial well being.

Outline of This Episode
  • [1:42] We go through this emotional roller coaster every 4 years
  • [7:35] Sometimes the best thing to do is nothing
  • [10:24] Have an investment plan and stick with it
  • [13:14] Focus on what you can control
  • [14:44] Today’s progress principle
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