Do Not Let Election Drama Sway Investment Decisions

Think back to four years ago, when media outlets and economic pundits were doing their best Henny Penny impersonations.

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The economic sky was falling. Whether Barack Obama or Mitt Romney was to be elected president, the United States would be unable to pay its bills. The stock market would drop to perilous levels, perhaps as much as 30%.

That level of drama went on for months.

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Now here we are four years later, and the drama is on par with where it was then, but this time, we started hearing it even earlier.

My advice: Don't buy into it. In fact, I want to focus on taking the drama down a notch.

Back in 2012, if we all had a dollar for every time we heard the term "fiscal cliff," we'd each have an additional $10,000 in our savings accounts. It was brought up every day on every channel. Before then, the term had never been used.

For those who don't remember, at the time, President Obama and Congress needed to reach a deal on $500 billion in tax increases and across-the-board spending cuts. Federal Reserve Chairman Ben Bernanke coined the term "fiscal cliff" to warn of the dangerous drop-off the nation faced if no action was taken.

We worried about whether, as a country, we would be able to pay our bills. On a scale of one to 10, our drama level reached a 12.

No one in the media ever discussed, to any great degree, a scenario that would pave the way for the positive year the market actually experienced in 2013.

Remember that as we continue through this election cycle. No matter how dire the situation may seem, no one has a crystal ball to truly predict how the market may or may not perform. You're better off disregarding all the gloom and doom and focusing on your own financial situation.

In any year, regardless of whether there is an election, the key thing is to develop a financial strategy that allows for the ebbs and flows that occur in the market at any given time.

Whether you use a professional or do it yourself, create a financial plan that allows for some clarity on how much money you are really willing to lose and how much money you are potentially willing to lose, even if it's just paper losses. The last thing you want to do is create an investment plan with too much risk, causing you to hit your "uncle point" and potentially make decisions that could have a severe impact on your long-term plan.

If you do work with a financial professional, be sure that person communicates with you effectively during stressful and uncertain times so you're not making rash and drama-filled decisions.

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Isaac Wright, president of Financial Dynamics & Associates, is a financial advisor and licensed insurance professional who has helped retirees for more than 15 years. He also is author of Navigate Your Way to a Secure Retirement.

Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor.

Yvette Hammett contributed to this article.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Isaac Wright, president of Financial Dynamics & Associates, is a financial adviser and licensed insurance professional with a focus on retirement planning and asset preservation for families and retirees. He has assisted families and retirees in reaching their financial, retirement and estate planning goals for more than 15 years. He is the author of Navigate Your Way to a Secure Retirement.