By the People and For the People?

President Trump and House Speaker Paul Ryan pulled the plug on their Republican health care bill.  The same week, Chuck Schumer encouraged his fellow Democrats to filibuster Neil Gorsuch, the nominee for the U.S. Supreme Court.  Politics as usual.

Democrats and Republicans have been adversaries from March 4, 1797 when John Adams was elected as the second President of the United States.   The parties have been butting heads for 220 years and despite their best (worst) efforts our economy and stock market continue to march on.  I’m afraid their bickering and whining will carry on for another 220 years.

While watching CNBC, commentators, money managers, traders, and other experts were predicting the stock market to fall on the news the health care bill had flat lined.  The experts painted a bleak picture for Trump’s presidency because the health care bill was dead on arrival.   They opined the news doesn’t bode well for the other items on his agenda.

As far as your investments are concerned, does it matter what our elected officials pass or don’t pass?  Does it matter if they fail to reach a compromise on important issues?  Does it matter who is in the White House?  Congress?  The Senate?  The short answer is no.  In the long run, it matters little to what happens in Washington D.C.

It took our elected officials 76 years to abolish slavery, 131 years to allow women to vote, 175 years to pass the Civil Rights Bill, and 201 years to pass the American’s with Disabilities Act.  Can you imagine how much stronger our country would be if our politicians had been working for the people since 1789?

Robert Shiller has been tracking stock prices from 1871.  In 1871 the index was at 4.44 and Friday the S&P 500 closed at 2,438.98 a gain of 54,831%![1]  The invisible hand of the free market continues to rule the day.

Our elected officials are supposed to be for the people, however, if you want to stay in the know follow the titans of business.   Tim Cook, Warren Buffett, John Bogle, Fred Smith, Sheryl Sandberg, and Robert Johnson will tell you all you need to know about our economy and the state of America.   Business leaders put money in your pockets while politicians take it out.  Elected officials come and go.  When the market does fall because of what happens in D.C., use it as an opportunity to buy the dip.

Try to ignore the rhetoric and mudslinging when constructing your investment portfolio. Here are few tips you can use to put yourself in a position to win.

  1. Create your financial plan. Your financial plan will be your guide for you and your family.  Your plan will be a collection of your hopes, dreams and fears.  Your plan will guide your investments.
  2. Invest in stocks. The stock market will be your best friend over time. Investing in low cost index funds or high quality stocks should be the cornerstone of your portfolio.
  3. Automate your investing. When your investments are automated you’re less likely to stop investing due to political noise.
  4. Rebalance your investment portfolio on an annual basis. This will help reduce your risk and keep your portfolio in balance with your long-term goals.
  5. Invest early and often. The earlier you start investing the more money you’ll have in your account.
  6. Spend less than you earn. The more money you can save the better your financial position.
  7. Avoid excess debt. Your total monthly debt payments should be less than 38% of your gross income.  If your gross income is $10,000 per month, your debt payments should not exceed $3,800.
  8. Give money away. Do some good with the money you’ve accumulated with your smart and sensible investing.

You can find good reasons to scuttle your equities in every morning paper and on every broadcast of the nightly news. ~ Peter Lynch.

Bill Parrott is the President and CEO of Parrott Wealth Management and is a believer in the invisible hand.  For more information on investment management and financial planning, please visit www.parrottwealth.com.

March 26, 2017

 

 

 

[1] http://www.econ.yale.edu/~shiller/data.htm, Robert Shiller, Long term stock, bond, interest rate, and consumption data accessed 3/26/2017.

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