5 key actions to keep your investments on track amid election year

As we approach the presidential election, there is a level of uncertainty that looms over the markets. Naturally, investors are concerned about how political shifts might impact their portfolios, and while the policies of political parties may influence economic conditions, historical data shows that the markets are more influenced by broader economic factors than by which party wins the election. (However, first, I’d like to share a story about the power of focusing on factors within our control and the importance of preparation. Both can lead to extraordinary success, whether defined by financial stability that provides you with the flexibility and options to live life on your terms – or eight gold medals.)

Blurred Vision: Michael Phelps’ Race for Gold

Michael Phelps entered the 2008 Beijing Olympics striving to take home eight gold medals in a single Olympics, surpassing Mark Spitz’s record of seven golds. The pressure he put on himself was immense, but the amount of preparation he put into achieving that goal was extraordinary. Confidently, he started the 200-meter butterfly but was faced with one challenge he had not prepared for – his goggles began to fill with water, blurring his vision.

In that moment, Phelps could have panicked or focused on his goggles failing during such a crucial race. Instead, he focused on what he could control – his technique, pace, and strategy. Relying on muscle memory from years of training, he continued swimming, maintaining his pace and counting strokes to know when to turn and finish. Despite being unable to see, Phelps won the gold medal and set a new world record. He trusted his preparation to help overcome the unforeseen challenge and went on to achieve his goal of eight gold medals in the Olympic Games.

Economic Conditions Over Politics

Historically, markets have weathered various political landscapes, with performance driven more by economic fundamentals than the political party in power. This isn’t to downplay the influence of policies on specific sectors or the economy at large, but to emphasize that long-term market trends tend to follow the broader economic environment. As investors, staying focused on economic indicators and market fundamentals rather than the political noise can provide a steadier path forward.

Regardless of the election’s outcome, there are proactive steps investors can take to ensure their portfolios remain aligned with their financial goals.

Here are five key actions:

1. Review and Refocus Your Financial Plan: What’s changed or coming in your life? How have your goals and priorities shifted? How comfortable are you with your current strategies and what on the horizon concerns you? Remember, your plan should be comprehensive and include the many pieces of your life including cash flow, business, investment, tax, estate, and risk management strategies.

2. Review and Rebalance Your Portfolio: Stay lashed to the mast of diversification. Market changes can shift your asset allocation away from your desired targets. Regularly rebalancing your portfolio helps maintain your risk level, ensures your investments are aligned with your goals, and may improve your chances of steady, long-term returns.

3. Continue Saving and Investing Regularly: Consistency is crucial in building wealth over time. Stick to your saving and investment plan, and consider increasing contributions when possible to take advantage of compounding returns.

4. Focus on Tax Planning: Effective tax planning can enhance your investment returns. The IRS recently issued new regulations on inherited IRAs, which could impact your tax liabilities. Understanding these changes and planning accordingly can help you minimize taxes and maximize after-tax returns. Also, elections have consequences – new policies, including taxation, may require adjustments.

5. Consult with Your Financial Adviser: A professional can provide objective and tailored advice and help you navigate life’s complexities, especially during uncertain times. They can assist in adjusting your strategy to stay on track with your long-term objectives and life’s transitions.

The Importance of Patience and Long-Term Planning

Warren Buffet said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” He was talking about investing. But his words apply to most ventures worth pursuing. And the fruits to enjoy come from patience and long-term planning.

Remember that no matter how much we plan, life happens — it dishes out surprises, both good and not so good — from foggy goggles to uncertainty about the future. While the upcoming election brings uncertainty, focusing on economic fundamentals and taking proactive steps with your investments can keep you on track toward your financial goals. Consistency, diversification, tax planning, rebalancing, and professional guidance are key strategies to navigate these times and build a robust financial future. We would welcome a conversation about where you’re at on your journey, where you want to go, and how we can help fine-tune your financial plan to better put things in your favor. May you secure your future wisely and always have sage advice.

Brian Loy is a Managing Director and financial adviser at Wealthspire Advisors. Brian has helped small- to medium-sized business owners address their unique financial planning concerns for the past four decades. He has dedicated his career to providing his clients – including entrepreneurs, health professionals, executives, and retirees – with the specialized financial services they need and deserve.