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Should Politics Change Your Investing Strategy?

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You turn on the TV at night for a few minutes of news and what do you get? Threats, accusations, dire predictions, and chaos. Uncertainty is everywhere. It’s in interest rates, it’s in the stock market, and it’s being piped into your living room day after day! What do investors and the stock markets hate more than anything? You guessed it: uncertainty.

I don’t know who is going to win the election in November. What I do know is that the constant barrage of negativity is creating anxiety for investors. I’m not talking about Wall Street investors, although they’re probably nervous too. I’m talking about you. I’m talking about the average retiree who is paying bills with income on investments, the worker who is planning to retire in the near future, and the person who has been socking away 5% of his or her income for years in a 401k and can’t stand the idea of another year like 2007. I’m talking about Main Street investors.

So what should you do?

  1. Keep the big picture in mind. This isn’t the first time that an election season has generated controversy, fear, and uncertainty. There have always been discussions about which party is best for the economy and the stock market. In time, this too shall pass. What also hasn’t likely changed despite the political turmoil are your goals and the time you have to reach them. If you have a short time-frame, you’re hopefully already investing conservatively. If you’re young with a long time horizon before you need to reach a goal, you may be better off weathering the storm that may (or may not!) come. Don’t make the mistake of making long-term decisions with short-term thinking!
  2. Consider your unique, personal set of circumstances. It doesn’t matter what your neighbor, your kid’s teacher, your co-worker, or your siblings are doing with their money. They aren’t you and they aren’t working within your personal situation. They don’t have the same needs, values, or beliefs that you do. In making big decisions, like how to invest your savings, the only factors that should be considered are yours. Talk to the person who knows your finances as well as you do: your financial planner. They’re best equipped to help you make the right decisions for your situation.
  3. Go with your gut. When I say your “gut” I’m talking about the instinctual feelings you have about risk. Risk and heightened uncertainty is what is facing you right now, and it is these factors that are creating your anxiety. Risk is an important component of investing. It changes for people throughout their lifetime and is impacted by the environment which one is facing. If you’re frightened or concerned, you need to re-evaluate your risk tolerance in light of your goals.

The good news is that in a couple of months, some of the uncertainty will probably begin to subside. The TV will return to benign commercials about cereal, the holidays, and the hottest new deals for car buyers! Who would have thought we’d look forward to that!?

Image courtesy of chatchai_stocker at FreeDigitalPhotos.net

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