Politics and Your Portfolio

We now know that the Democrats will control the House, Senate, and the White House in January. What changes should you scramble to make in your investment portfolio as a result? We think you should not have to make any. Here’s why.

We believe that you should already have a solid, tax-efficient investment strategy that is well diversified and utilizes high-quality, liquid investment assets. Unless your personal financial situation has changed, you should stick with your strategy. ‘Markets are stronger than governments’ is an observation credited to Warren Buffet, and a reflection that we think resonates. Reacting to the news of the day rarely works out well for investors, as market timing is rarely successful. Dalbar Inc., a company which studies investor behavior, found that for the twenty years ending 12/31/2015 the average equity fund investor earned a market return of only 5.19% while the S&P 500 Index averaged 9.85% during the same period. The average equity fund investor’s return was significantly lower due largely to investors’ impulsive reactions including chasing returns on the upside and selling securities at the lows due to emotional reactions to market corrections.

The past few weeks have been ripe for anticipatory moves by investors. While some ‘market experts’ called for a major market correction should the Democrats control both the House and the Senate, instead we saw strong gains during the first few days after Georgia’s run-off elections became clear. If you believe that the new Congress will bring higher taxes, the market’s reactions may seem counter-intuitive. If you became nervous and jumped out of the markets and went to cash, you are probably not too happy.

Now is a great time to review your portfolio and the underlying investment strategy with your financial advisor. You are also welcome to contact us for our time-tested insights.

This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney, tax advisor or plan provider.

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Tom McCartney is the Founding Principal of My Advisor & Planner and a Registered Representative and Investment Advisory Representative with M Securities. Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. My Advisor & Planner is independently owned and operated.

Tom and his team can be reached at info@mapyourfuture.net, at 630-457-4068, or you can visit them at www.mapyourfuture.net