The first 100 days of every new presidential administration has become lexicon ever since it was coined back in July 1933 by President Franklin D. Roosevelt. The first 100 days is the period used to measure the accomplishments of a president during the time that his influence is at its highest. Fortunately as investors, we are not under that kind of pressure to make sure we succeed in such a short period since our successes (or failures) are measured over a longer period.
However, there are things we can do in the first 100 days of every New Year to ensure we put ourselves in a position to succeed down the road:
Don’t worry about politics. As I’ve told many clients and investors through the years, mixing politics with investing is akin to drinking and driving. Nothing positive comes from letting any hardened political views and/or emotions impact the way you invest for your future. I’ve seen people literally sell everything in their portfolio because they didn’t like a president only to miss out on future gains. Missing out on investment gains can have a material impact on long-term returns. As the famous investment saying goes, it is time in the market, and not market timing, that counts the most.
Do a complete review of your asset allocation. This is an excellent exercise for every investor to do. This involves looking at your mix between stocks, bonds and cash to make sure the allocation is appropriate for your goals and objectives. Last year is a great example: Although domestic stocks finished the year on a strong note, if your portfolio is too top heavy in domestic stocks, you might want to consider reducing exposure to domestic stocks and/or adding money to other areas in your portfolio such as foreign stocks and bonds to name a few. Of course, this assumes you even have a dedicated investment allocation for your situation, which I believe is critical for every investor to have. Monitoring your asset allocation is necessary for managing volatility, which is one of the crucial roles we play at Bloom Asset Management. To achieve long-term success, it is important to make sure you understand what investments you own, why you own them, and in what percentages.
Don’t focus on new highs of any market index. As I write this blog, the Dow Jones Industrial Average, which spans back to May 1896, recently hit an all-time high of 20,000. The financial media typically goes crazy over new all-time highs, especially when they end in round numbers like 20k, and they certainly didn’t let us down the day the Dow finished above 20,000. But keep in mind that the level of the Dow, the S & P 500 Index or any other index is meaningless. So much attention is paid to them, but they do not mean much other than it shows the bull market remains intact. The Dow is made up of only 30 stocks, while your diversified portfolio is made up of U.S. stocks, foreign stocks, emerging market stocks, and bonds, among other areas. Your focus should be on your own portfolio so that it too can reach and exceed all-time highs.
Do a complete review of your investments. A new year is a good time to make sure the investments you are using in your portfolio still make sense going forward. A good exercise is to compare how all of your investments performed versus comparable market indexes. If you are using individual securities as opposed to mutual funds and/or Exchange Traded Funds (ETFs), then it may be more difficult to measure performance of a stock. It is far easier to use mutual funds and/or ETFs because you can compare them to a representative index as well as peers. Pay close attention to a fund’s short and longer term record. Too many investors focus solely on short-term performance and do not place as much emphasis on a manager’s longer record. If you are using actively managed mutual funds, then it makes sense to compare how the fund is doing versus its benchmark as well as peer group. You should also consider how much risk a manager is taking to generate its returns as well. Many investors overlook this fact in assessing performance. If you are using mostly passively managed funds and/or ETFs, then there is nothing to compare since you own index investments.
While the media will be paying a lot of attention to the new president’s accomplishments in the first 100 days, you should focus on reassessing your investment strategy to make sure you’re on the right track for the rest of the year. After all, as a long-term investor, what happens in the next 100 days will not necessarily make or break your ability to reach your financial goals. So don’t get caught up in the hype. Instead, review and adjust your portfolio to be well positioned for success in the long run, no matter what the president does in his first 100 days.
Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or a loss. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making an investment. Please consult with your financial advisor about your individual situation.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.