Every day, there seem to be more headlines surrounding global politics and economics. Concerns of wars, economic growth, policy shifts, government finances, inflation, and political leadership are constant. Regardless of political affiliation, some may feel concerned about the impact of the recent policy changes and economic uncertainty on their investments. While these things are important, politics don’t always translate directly to portfolios. It’s not that these things don’t have an impact – of course they do. But trying to predict them, time them, and trade around them is a fruitless endeavor. Here are a few reminders that can be helpful at this time:
Investing in companies, not politicians or policies or countries
With our equity securities, we are invested in companies. We are not invested in public securities that represent a politician or a country or a policy. Companies may be affected by policy changes, but they will search for ways to innovate and adapt to the changing environment around them. Some companies falter, new ones emerge. Some companies benefit from policy changes, some are hurt by them. This is part of the reason for diversification and not being too heavily concentrated on one type of investment.
Stick with the plan and the principles
Remember that volatility in the markets is normal. When we are planning for your portfolios, one of the most important things we take into consideration is the time horizon for that particular portfolio. If you have a short time horizon for a particular bucket of money, we seek to lower the risk through the securities we buy. If we have a longer time horizon for another particular bucket of money, we can take more risk. That risk can lead to higher returns over time, but it will inevitably come with more volatility. If you ever have questions or concerns about your portfolios, please reach out so we can help you remember why we have them invested the way we do.
Control what you can control
It causes anxiety seeing news that you don’t feel you have any power to change. So what can you control? As we meet and go over your financial plans, we understand there will be these moments of uncertainty and anxiety. With the foundation of a good plan, instead of worrying about what we can’t control, we can continue doing our best at what we can control. Among other things, we can continue improving at our job and adding value wherever we work, we can find ways to lower our costs, and we can remain disciplined in our financial plans.
Think past the next day or two
People get caught up in the day-to-day news cycle, and often don’t think past what’s going to happen in the next day or so. If people feel doom today, they have a hard time feeling hope for tomorrow. But we must remember that the most valuable things in life aren’t built overnight. The sun will come up the next day, and companies will adjust and find solutions. And if they don’t, then other companies will take their place. One possibility that could help with anxiety is checking your accounts less often. Not checking your accounts for a week or so isn’t going to make the shares you own disappear. Continuing to check the market isn’t going to have an impact on its direction.
Diversification is key
Remember that just because one area of the market may be doing poorly, it doesn’t mean that others are following suit. In our portfolios, we have different types of investments. There are stocks based on size and style, as well as geography and industry. There are bonds with different maturities and credit risk. These different investments may all move differently, allowing us to take advantage of the ups and downs in our rebalancing. We are also very cognizant of what we sell when we withdraw money for someone, trying to allow things that are down the most time to recover.
We understand that the news can cause anxiety and fear. We understand that people have real concerns about their money when things change in the world. We want you to know that we are being thoughtful and principled in our approach to everything we do. Please reach out if you have questions about your specific situation.
*Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.