Into client D, and I love the way this headline is written because there are probably a lot of folks out there watching. We live in a very political world these days. Fortunately for you guys, the Money Guy show doesn’t get into that stuff. We try to stay above it. However, Clan D reached out to us because they let CNN and/or Fox News help manage their portfolio. I bet a lot of people, including you or your relatives, can relate to this in your own way.
Here’s what happened with this client. In 2016, you know, during the presidential election, we got a call right after the election results. They said, “I was watching the news, and this President Trump is coming on board. This is some scary, scary stuff. I want to go to cash.” Now, I will say we convinced him to not take everything to cash. I think we deserve some credit, although they might not admit it. We had to convert a chunk of their money into cash because they were so sure that this was going to destroy the economy.
What I find interesting is that during elections, including that one and probably others, both sides make claims about what will happen if a particular person wins. They are adamant that they have it all figured out, that they know what the future holds. Unfortunately, I don’t think the future is quite that clear. And unfortunately, for this client, in 2020, we lived through it, we made it through it, and we saw what the markets did. It turned out very differently than the client had anticipated. So going to cash was not the prudent financial decision to make at that time. The markets made a decent amount of money right after that election, and the client admits it was a learning opportunity for them.
But we wanted to create an illustration so you can also turn this into a learning opportunity. If you are a person who’s swayed by politics and cable news networks, remember that they don’t care about your wallet. The cable news networks always try to create shocking fear campaigns because they need your attention for advertising. We want to create a slide that shows all the presidents back to the ’70s and what they did while in office in terms of total performance and annualized performance. You can see the good news is that, like all things, the market and the economy want to grow and expand. So the stock market is the beneficiary of that. Most presidents, except for one on this list (poor W), had positive performances. W is the only president who actually put his initial on the stock market. You can see he had a negative performance, but he did get to put a “W” with the stock market volatility. It’s interesting that the majority of the time, markets make money.
So what are some things you can do or how can you position yourself to do better? The very first one, Brian, is one of your favorites—always be buying. Automate the wealth-building process. If you are in the accumulation phase and building towards financial independence, this should be a no-brainer. It takes all the stress and pressure points out of it. While you’re young enough and have years and decades until retirement, make it happen. That will also protect you from number two, which is knowing your blind spots.
Knowing your blind spots is crucial. If you find yourself glued to your news channel of choice or social media during political seasons or geopolitical events, and it begins to impact your financial decisions, you need to recognize that as a blind spot. Are you acting on actionable sound advice, or are you allowing your emotions to take control? Be aware of how you are influenced and affected by the information you consume.
That may be should not influence me to take action. That leads to what you mentioned about not being an emotional investor. So, we say, “Avoid being an emotional investor.” It’s one of the things that I think is a superpower when you can tell you’re maturing with your mind, your money, and your skill set. Like I said, blind spots and emotional stuff can cause sleepless nights. If you can create a system that helps you get through that and stay away from the noise and other things that don’t care about your wallet or your success, you just need to create processes that make you feel secure. It’s the analytics, systems, and processes that will help you navigate the emotional stuff that might tempt you to react impulsively. That’s not going to be healthy.