S
o much is going on to sidetrack
investors and trigger volatility in
the markets. In fact, in a recent
Kiplinger-Personal Capital survey, respon-
dents identified political deadlock, global
trade/tariffs, and geo-political tensions as
the top threats to the US economy in 2020.
Throw in an upcoming presidential
election, and it’s not surprising some in-
vestors are nervous despite overall posi-
tive trends in the market. According to
the survey, they’re stockpiling cash (an
average of 17% of assets) and a good por-
tion (nearly 4 out of 10) are checking in-
vestment accounts weekly or even daily.
But while many remain nervous, others
are showing signs of euphoria. And the
reality is that long bull markets typically
don’t end until there is near universal
optimism. That is far from the case now.
So, while a downturn is inevitable (and
we should never be surprised when one
hits), we see no reason the party can’t con-
tinue through 2020 and beyond. Histori-
cally, stocks rise in about 70 % of calendar
years. Those are tough odds to bet against.Staying focused now
That said, 10 years into a bull market is
probably not a wise time to get greedy,
and trying to predict its future course can
lead to costly mistakes. A better step is to
make sure you know what you own and
to make reasonable assumptions about
expected risk and return outcomes.
If nothing else, you should determine if
you are on track for your retirement spend-ADVERTISEMENT
By Craig Birk, Chief Investment Officer
Don’t Let Politics and Volatility Distract You
From Your Investing Goals
PROFESSIONAL INSIGHTS FROM PERSONAL CAPITAL
Personal Capital offers free online financial
tools, a mobile app, a high-yield account,
and personal wealth management services.
Learn more at http://www.personalcapital.com.ing goals, how much of your portfolio is
in stocks, and how much you have in any
given sector. In the last two bear markets,
the leading sectors heading in declined
80 %. That is unlikely to repeat, but it high-
lights the risks of sector concentration
which most people don’t fully appreciate.
You’ll also want to establish a checklist
or review process for major portfolio
changes. The idea is to understand if you
are making a change for a rational reason
or because something changed in your
life versus making decisions based on
emotions, such as fear of loss or fear of
missing out.
Extreme portfolio changes — both in
and out of the market — that are driven
by emotion can be a big mistake. Selling
in times of fear or piling in on top of a
market rally may feel good in the short
term but often times can lead to disaster.The 2020 election: Should you worry?
All presidential elections are emotional, and this year will be more so than usual,
no matter who wins. That is likely to lead to an increase in choppiness around
the election. But it still doesn’t tell us which direction the market will move overall.
Historically, markets have performed well in election years, with the first and
second years of a president’s term being most volatile. In election years, returns
have historically been better when a Republican is elected. But first-year returns
are often better with a Democrat.
Bottom line: Investors shouldn’t get too caught up in which party wins.For those worried about market declines,
it is much better to be in a conservative,
diversified portfolio with a lower equity
allocation than to sit completely on the
sidelines or make a few big bets on iso-
lated stocks.And in the long term
A smart move to make is to take a step
back and get a holistic view of your finan-
cial life. Know where you are in good shape
and where you are not. Then identify an
asset allocation you think makes sense for
the next ten years and stick with it.
Also, at any point, smart investors man-
age the things over which they have some
control. Taxes is one of these. Another is
periodically rebalancing by taking profits
from what has done best and reallocating
them to asset classes that are lagging.
This kind of rebalancing has proven to add
value over time.
Many times, financial planning actions
are more important than investment re-
turns. Make sure you are saving the right
amount. And if you’re already retired, make
sure you’re drawing appropriate amounts
from the right accounts. Also, almost ev-
eryone should have an estate plan in place.Keeping your eye on the prize
Ultimately, it’s most important to stay
grounded. Investors who focus on big-
picture retirement goals are less likely to
make short-term emotional investment
mistakes.
Taking advantage of improvements
in technology is another key step. Great
tools exist to help you understand and
track the level of risk in your portfolio
and how it impacts your long-term goals.
Personal Capital’s holistic tools, for exam-
ple, are a fantastic way to view the larger
picture and avoid piecemeal investing. ■Advisory services are offered for a fee by Personal Capital Advisors Corporation, a wholly owned subsidiary of Personal Capital Corporation. Personal Capital Advisors Corporation is
a registered investment advisor with the Securities and Exchange Commission (“SEC”). SEC registration does not imply a certain level of skill or training. Investing involves risk. Past
performance is not a guarantee or indicative of future returns. The value of your investment will fluctuate, and you may gain or lose money.