Stressed by Election Jitters? Heritage Capital, Your Connecticut Financial Advisors, Can Help

With the upcoming election looming, are you feeling anxious about its impact on your hard-earned investments?

This concern is understandable because election cycles have historically been linked to more market volatility.

In this article by Heritage Capital, we’ll discuss the connection between elections and market fluctuations and how they can trigger emotional reactions in investors. We’ll explore the benefits of active management in a volatile market, especially during times of election-related anxieties.

The Impact of Election Anxiety on Investors

The markets tend to experience higher volatility in the months leading up to a presidential election. For example, during the 2020 presidential election, the Dow Jones Industrial Average experienced significant fluctuations, with daily swings exceeding 1,000 points.

The markets don’t like uncertainty. The political climate and changes in administration can affect economic policies and regulations. Investors become concerned about potential shifts in government policies, such as:

• Tax policy: Investors may worry about tax increases or changes to tax brackets, impacting your investment returns and tax liabilities.
• Economic regulations: Uncertainty surrounding regulations on industries or businesses can lead to market jitters.
• Trade agreements: Changes in trade policies and tariffs can impact business operations and global markets, leading to market volatility.
• Geopolitical tensions: Depending on the candidates’ stances on foreign policy, elections can raise concerns about international relations, potentially impacting global markets.

Psychological Impact on Investors

This heightened volatility, coupled with the constant news cycle surrounding elections, can lead to anxiety, and investors might be tempted to:

• Sell investments prematurely: Fearing further losses, some might sell their holdings in a knee-jerk reaction, locking in losses.
• Move to overly conservative investments: Seeking safety, investors might shift their portfolios heavily towards cash, sacrificing growth opportunities.
• Sequencing risk: Retirees face sequencing risk when a market pullback occurs early in retirement, affecting portfolio income and growth.

Emotionally driven decisions can derail your financial goals. Let’s explore how active investment management can serve as a more disciplined investment approach during election cycles.

Navigating Election Market Volatility Through Active Management

Active management offers a distinct approach to investing compared to passive investing. Unlike passive investing, which follows a “set it and forget” strategy regardless of market conditions, active management takes a more hands-on approach.

During times of uncertainty, active management allows for more flexibility, as experienced investment advisors can adjust portfolios in response to changing market factors. This approach also helps manage risk by diversifying investments across various industries and asset classes.

Here’s how active management can be particularly advantageous during election cycles.

Proactive portfolio adjustments: Active managers like Heritage continuously research market trends and analyze potential outcomes of various election scenarios. This allows us to proactively adjust your portfolio allocation to potentially mitigate risk and capitalize on potential opportunities. For instance, some sectors can react differently based on the anticipated policies of the incoming administration. Your advisor might increase your exposure to specific industries poised to benefit.

Disciplined investment approach: Active management emphasizes a disciplined, research-driven strategy. Your Heritage advisor won’t be swayed by the emotional swings of the market or the daily news headlines. We’ll focus on making adjustments based on sound analysis and data, not fleeting anxieties.

Focused on your financial goals: Active managers understand that elections are temporary events. Our primary objective is to ensure your portfolio stays on track with your risk tolerance and financial objectives, regardless of the political landscape.

Rather than relying on simplistic mutual fund strategies that can leave your investments vulnerable, Heritage utilizes active management techniques, adjusting clients’ portfolios as financial markets evolve. This approach aims to minimize risks and strives for investment protection during periods of volatility.

Finding an Experienced Financial Advisor in Connecticut

While there’s no shortage of financial advisors who want to manage your investments, not all aim to make you money.  Many strive for average returns through passive investing strategies, which may seem appealing when markets are stable. However, markets don’t move in straight lines, and when they drop, often you’re told to “stay the course” as a buy-and-hold mentality.

Unfortunately, this advice can be quite harmful as you get closer to retirement or already retired. You might have to withdraw money and turn paper losses into real capital reductions, which may not recover. A passive approach can expose your assets to undue vulnerability and volatility.

With many advisors, your money often goes to a third-party manager you never meet. This not only adds extra costs but also removes a personal connection. As a result, this manager may not fully understand your financial situation, including your assets, obligations, and risk tolerance.

If you’re wondering how to find a financial advisor for active investing? Consider using these five critical questions to make an informed and objective decision. 

1. What is your investment philosophy? – This question helps you see if their strategies are passive or active and if they match your financial goals and risk tolerance.
2. What are your qualifications? – Inquiring about their credentials, experience, and education can give you a better understanding of their expertise and professionalism.
3. How will we communicate? – Knowing how often you’ll get updates and through which channels to set clear expectations for your ongoing relationship is essential.
4. Are you a fiduciary? – This question ensures the advisor is legally required to act in your best interests rather than just selling products that benefit them financially.
5. How do you get paid? – Knowing their compensation model (fees, commissions, or a mix) helps identify potential conflicts of interest.

During election-induced market volatility, consulting an experienced fee-only financial advisor in Connecticut who understands local economic trends, tax regulations, and relevant impacts is vital.

Heritage: Your Active Management Advisors in Connecticut

Election season doesn’t have to be a source of investment anxiety. For over 30 years, Heritage’s and fee-only fiduciary financial advisors in Connecticut have been helping people thrive in retirement by prioritizing planning and risk control.

We have extensive experience in active portfolio management across various market conditions and are an award-winning personal investment management firm. You’ll work directly with our Accredited Investment Fiduciary® money manager and his team, who will report to you so you’ll get the answers you need to stay confident.

Heritage’s expertise in active management can empower you to navigate these uncertain times with greater confidence.

Schedule a no-obligation consultation with us today.