The other day I received a call from an upset client. As a financial advisor it is not unusual to receive calls from clients with serious issues as it is part of the job. What made my client so upset was the unveiling of the Green New Deal. For those of you who don’t know, the Green New Deal is sort of a wish list by members of the progressive end of the Democratic Party as to how the country should be restructured in order to address a variety of issues such as the environment and taxation. My client was panicking because she felt that if these reforms ever became law, it would ruin the U.S. economy and markets would react very negatively. She wanted to make sure she was out of the market when that happened.
The first thing I explained to my client was something all of us should know by now, and that is what politicians say they’re going to do and what they do, are two different things. In fact, I would say that a politician that lives up to their promises is the rare politician. As I explained to my client, a politician’s wish list very rarely, if ever becomes law. Particularly, in the situation at hand where we are talking about sweeping reforms to just about every aspect of American life, it is hard to believe that it ever will become the law of the land. Therefore, I told her there is nothing to be overly concerned with. That doesn’t mean that the issues addressed by the Green New Deal are not important, it is just that from a portfolio standpoint, there is no reason to react to a wish list and to make radical changes to one’s portfolio.
For as long as I’ve been in the financial world, I have always believed that people should make decisions based upon laws and rules as they are now, not what is proposed or what they may be in the future. Even if you go back to President Trump’s recent tax reform; he did not get everything he wanted, and he had to make compromises. That’s the way our system works. In fact, because when it comes to legislation, so much is negotiated and renegotiated at the last minute that you truly never know what is in a piece of legislation until it is passed and put in writing. We see this frequently with tax laws where major provisions are changed at the last minute and you only find out about it after the law has been passed and reduced to writing. Making decisions based upon speculation can be very costly, and it is something you should avoid.
We live in a world where people speculate and make predictions all over the place. People tend to think if a person is on TV they must be credible; unfortunately, it doesn’t always work that way. In addition, let’s also keep in mind that for any advice to be relevant it must relate to your individual situation. What may be good for your next-door neighbor may not be good for you. The bottom line on any advice: You must apply it to your own individual situation and your own goals and objectives.
I learned a long time ago that when it comes to making financial decisions, less is sometimes more. The less you listen to the talking heads on TV, the more of a chance you have to be a successful investor.
Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email Rick at firstname.lastname@example.org.