With the midterm elections approaching, there are some political fallacies in the minds of many voters. And with those fallacies come three facts you must remember:
First, the economy will not be fixed by the election. No matter which side prospers, there are still issues that will not be repaired simply by a political election. The issues probably will not worsen either.
We did not get into this economic mess overnight and we most certainly will not get out of it quickly. There are too many issues with taxes, inflation, unemployment, business spending, bank lending, and consumer and business confidence that cannot be fixed with a ballot.
Secondly, the election could still go to either party, and both have completely different points of view. The left is coming from a high-tax, big-government, and wealth-equalization point of view, while the right is thinking less government, lower taxes, and pro-business. Both sides have their pluses and minuses. But at the end of the day, one will win and that will guide us in a specific direction. The only control we have is with our vote. Once cast, we must accept the results, no matter the outcome.
The above brings us to the third fact. If the economy cannot be fixed with the election that can go either way, every investor must have a strategy to adapt to either outcome, and more importantly, one that looks longer-term. The economy will eventually improve no matter which side wins. But depending on the plan utilized by the reigning party, recovery could take longer or arrive more quickly. When looking for an investment strategy, every investor must not think about the economy and markets today, but more likely next year and the following three years. That is how you come up with strategy.
Also remember that strategy is looking at the big picture, and tactics look at the everyday changes. While tactics are important, beginning with the proper strategy is paramount.
For example, if retirement in five years is your goal, your strategy will certainly be different from someone who will retire in 20 years. In fact, you would likely be more conservative and utilize a portfolio designed to have less volatility. The investor retiring in 20 years may look to a much higher level of equities because they can stand more volatility knowing they won't need their money for years.
The point is not to forget about the election, but to vote with your mind and plan strategically knowing that the election can have any outcome and no matter which, the economy will not miraculously recover.
You need a strategy and cannot sit, wait, and hope on a specific political outcome.
Kelly Campbell, Certified Financial Planner and Accredited Investment Fiduciary, is founder of Campbell Wealth Management, A Registered Investment Advisor in Fairfax, Va. Campbell is also the author of Fire Your Broker , a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisors abandoned their responsibilities to help them weather the storm.