It's a presidential election year and this covers Wealth Management Actions to take right now. Sierra Pacific Financial Advisors, LLC is a fiduciary RIA with Schwab as our valued investments custodian providing us access to a wide and deep breadth of wealth management information such as the following insights, largely attributed to Schwab Center for Financial Research.
Overview:
Presidential election years always bring about uncertainty and strong emotions, often creating stress for investors. What should you do about it this year?
Well, uncertainty and stress data shows can often lead to poor financial decisions. We suggest investors maintain discipline and stay the course; ignore the noise and stay invested as always based upon your time horizon and risk profile, and pre-plan for inevitable volatility in your portfolio.
Read on in this entry on why it's recommended to Ignore the Noise and Stick to Your Plan.
Ignore the Noise:
As media coverage continues to ramp up approaching November, so does the noise level. Investors often wonder about prospective portfolio changes based upon campaign or party promises. From a public market perspective though diversified portfolios have generally continued to grow, irrespective of who is in the White House. As depicted in the chart from Schwab below, in the long term, elections likely don't matter. A one dollar hypothetical portfolio investment of U.S. large-cap stocks, grew from January 1, 1961 to $571 by April 30, 2024. This despite 12 presidencies and shifting between Democratic and Republican parties eight times. This steady growth is also seen for a more diversified portfolio (mix of stocks, bonds, and cash). So, in general, makes sense to ignore the "noise" and stick to your plan.
Stick to Your Plan:
Elections can be very divisive and evoke strong emotions, that we all feel. No doubt though it's generally best not to let our emotions influence our investment and financial decisions. Having a sound, long-term financial plan and sticking to it, is typically your best bet.
Over the long term, staying invested, regardless of who wins an election, has historically been the best course.
As depicted in the Schwab chart below, see what happens to a hypothetical $10K portfolio of U.S. large-cap stocks from January 1, 1961 through 2023, in three different scenarios: investing only when a Republican was president, investing only when a Democrat was president, and staying invested throughout, regardless of who occupied the White House. As shown, investing only when a Republican was president the $10K investment grew to $102K. Investing only when a Democrat was president, the $10K grew to over $500K. And if the investor stayed invested the entire time, the $10K investment garnered over $5M. As you may of heard, it's not "timing the market" but "time-in-the-market" that generally delivers the best outcomes.
Your financial plan should be comprehensive, tailored to your specific needs, time horizons, expected life events, risk profile and accommodate the inevitable volatility expected over the long term. For instance, provisions for a large purchase, such as a house in the next few years, saving for your children's college, tax-wise charitable contributions, when and where you might want to retire, and more, should all be accommodated for in your financial plan. Much less so the presidents that will move in and out of the White House throughout your lifetime.
Attribution: https://www.schwabassetmanagement.com/content/5-wealth-management-actions-election-year