Investment Plans and Elections ... Stay the Course

We're hearing lots of post-election concern these days about the fiscal cliff, taxes, socialism, U.S. debt and deficits, Europe, Spain, Greece, California, Illinois and a whole lot more.

As a result, many people have become even more nervous about the idea of staying or investing in stocks for the long haul.

In my view, that short-term-itis is a mistake made all too often by individual investors. So sit back, take a deep breath and hang in there, assuming you're in for the long term.

The best advice to individual savers and investors is simple. Get in the habit of buying stocks and then stay in that habit, if you're not already doing so. And routinely save and invest as much as you can, because down the road you'll be happy you did. Take it from an oldster. Time flies.

An Election Probably Shouldn't Change Your Financial Plan contains good advice from a financial planner and writer:

"New information is scary. When things change, we often don’t know what to do. We may have had a plan before things changed, but things are different. So now what?

With the election last week, we suddenly have lots of new information, or at least it feels like we do. 

A little less than half the country is surprised and even disappointed. And unless you’re living in a cave, you’re now hearing about the uncertainty surrounding the looming budget showdown.

At times like these, there is a tendency to act now and ask questions later. Before you do, take just a moment, a small pause, and walk through a few steps to avoid making a big mistake.

1. Do you have a plan?

I’m assuming you do. You have a clear idea of where you are today, where you want to go and you have spelled out the investment process that you think will get you there.

2. Does this new information change that plan?

Any investment or financial plan most likely has risk built into it. Uncertainty is not new. Of course, this time might indeed be different, but don’t bet on it. Instead, make sure that the level of risk you’re taking matches your goals.

3. Should you change course?

After reviewing your plan in light of this new information, the key question to ask is whether a change is warranted. The primary reason for making changes to a sound plan depends on changes in your life and goals, not changes in the markets or politics. So if your goals haven’t changed, and you have a rational plan to get there, stick with it.

If, on the other hand, this new information has you reassessing your goals and the level of risk required to get there, it might be time to revisit your plan. Do it deliberately and with care, because history has shown that selling when worried can be a bad idea.

And all this process requires is that you pause and ask a few questions before acting. It seems like a small thing to do to avoid making the same painful mistakes over and over again."

SUMMING UP

If you're a long term investor, it's almost always best to stay the course.

While share prices could be quite volatile the next several weeks or even months, the economy is improving and will continue to do so for years to come. How fast and not whether it will improve is the relevant question. And probably not very fast is the most likely answer.

Finally, if we're surprised, it will be because the economy grows faster than forecasted, and that's always good for investors and everybody else, too.

So remember that we're past the worst part of the recent economic and financial debacle, healing has begun and an economic tailwind is in place as interest rates will remain low for at least several more years.

Now all we need is for the politicians not to muck things up.

That may be asking a lot from our government knows best gang, but my guess is that just like general economic activity and housing starts, our politicians are in the process of "bottoming" too.

Keep the faith. And if you're like me, you'll bet on America and stay the course.

Thanks. Bob.