How the Election Will Impact Your Portfolio and the Economy

Many people are very passionate about politics and are extrapolating what will happen economically if their candidate or the other side gets elected. These extrapolations often run to ruin if the other side gets in and can cause great fear and emotion in the mind of the investor and lead to poor decision making.

I like to adhere to the old adage that, "You do not talk about politics or religion." However, I'd just like to say that whatever 'side' you may be on, I'm sure an informed observer can look back through history and see presidents or policies they do not like. Yet, our country and economic system still persist today. I would observe that it is in fact quite resilient and supposing 'this time is different' rarely works well for those making predictions.

Jason Zweig of the Wall Street Journal ran a good article in the October 19, 2012 Wall Street Journal, entitled "The Winner for Investors Is...," and empirically (not pejoratively) looks back through history when considering presidential elections and financial markets. He writes, "Most of the answers you are likely to find are propaganda or wishful thinking; many are flat-out wrong."

The article is definitely worth a read and hopefully brings some balance to the very passionate of any political persuasion. Click here to read the article.

Happy Voting,

Kevin Kroskey

Diversification: Disciplinarian of Disciplinarians

Disciplined diversification works when you do and even when you don't want it to. Diversification in effect forces you to sell the thing that has been doing so well in your portfolio and to buy the thing that hasn't. While this makes rational sense, it is emotionally difficult to execute. Think back to the tail end of 2008--were you selling bonds and cash to buy stocks? Most likely you weren't unless your advisor or some sort of automatic trigger did it for you. Carl Richards of www.behaviorgap.com provided a good reminder of how diversification works in a recent NY Times blog post. The diversification he discusses here is more so related to equity asset-class diversification but also touches on the three basic building blocks--equities, bonds, and cash. He doesn't discuss alternative asset classes -- an asset class that doesn't fit neatly into the three basic categories -- being used to further diversification, but that's a detailed topic for another day. ...

Did You Do as Well as Your Mutual Fund?

It's common practice to look at a fund's total return number for a snapshot of what performance to expect, but that won't give you the full picture. Morningstar studies have shown that investors' actual gains frequently pale in comparison to reported total return numbers. This phenomenon frequently plays out among funds that attract assets after streaks of hot performance, only to see some investors get skittish at the first signs of underperformance . After a moment's though, even a novice investor will realize that this behavior is just the opposite of the mantra -- buy low and sell high. This practice can be more broadly attributed to bad behavior and lack of a plan or philosophy when it comes to investing. Investors are human and humans are emotional. As much as the logician in me would like to believe my left brain is working to drive my decision making, logic comes in after emotions are experienced to provide context for how we are feeling and not the other ...

Healthcare Reform Explained

If you're like me, you find the 1000 page plus Heathcare Reform Act a bit confusing. This nine minute animated movie -- featuring the "YouToons" -- explains the problems with the current health care system, the changes that are happening now, and the big changes coming in 2014, produced by the Kaiser Family Foundation. Kevin Kroskey, CFP, MBA

Kevin Kroskey's Money & Mind

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