My Investor Who Was Concerned About The Election







The e-mail came in Friday before the election. My investor was very concerned and wanted to liquidate most of his equities and “sit on the sidelines for a few weeks.”  And when the “dust settles” reinvest accordingly.  I’m assuming this investor had a hunch Trump would win, and thought that it would cause his portfolio to crash.  A part of me understood.  In fact when I attended the Pershing Insite conference in Orlando this year, one of the very informed economist speakers told us that a Hillary win was already priced in and Trump would have an adverse effect.  But I still knew it was a bad move because economics and politics are too complex to predict short-term outcomes, no less correlation between the two.  But the investor gave the orders, and I had to oblige and sell.

So as we know, he was right in Trump winning but  here’s what happened to the markets as represented by the Dow:


Election morning we are at 18,288, five days later we hit an all time high of 18921.  So, as measured by the Dow, he misses out on close to half of the entire year’s growth, reinforcing my understanding that  we are better off creating and monitoring a financial plan rather than trying to predict short-term market moves.

Hillary Clinton, Donald Trump And Your 401k







With less than a week to go before the election, many 401k plan sponsors may wonder how the outcome may affect their plan. I have seen all kinds of opinions on this, such as the “Presidential Election Cycle Theory” which holds that, regardless of who wins, the equity markets are weakest in the year following election year. There are some studies that “prove” that the markets do better under democrats than republicans. Etc

Some of these studies do have some merit, in proving some kind of election/market correlation. But correlation does not imply causation (Both forest fires and ice cream sales are up in the summer but forest fires don’t cause more ice cream sales). Also, if there is some causation it can change at any time  as the markets and the world changes (During Obama’s second term, the market completely failed to follow the “Presidential Election Cycles Theory”)

It’s too complex, risky and expensive to try to adjust 401k investments based on an election. Instead ignore the election when setting up and adjusting your long-term plan for your 401k.

Pro- Finder Contest Story

My business is providing objective and transparent financial and administrative advice to small/ mid-size companies that sponsor 401k plans for their employees.  This venture has been very rewarding as I  impact people’s lives in a positive way. As we move from an era of financial dependence on corporate benefits and government entitlements in retirement to a time of financial independence, where we need to figure it all out ourselves, the  401k will play an increasingly important role for many American workers.

And frankly, many of the 401k plan providers and products have fallen short: fees are often too high, communication infrequent and many programs are disorganized and even out of compliance. Being able to provide a hands service including administrative, recordkeeping and financial advice has allowed my to improve the quality of a companies 401k plan, improving the owners and participants retirement picture, often reducing costs in the process.

Linkedin Pro Finder can potentially be a tool that could connect those looking for objective and transparent 401k advice to my firm,  where a conversation can begin and potentially result in improved retirement outcomes.

Beware Of Yield Fixation







I listen to the radio commercial in my car which goes something like this: “For years David Lerner has been providing steady income to our investors…”  - that’s when I change the channel.

I check my voice mail in the office “Hi, this is so and so from so and so investment management, and I want to speak with you about showing your clients our core income strategy…” – that’s when I hit the delete button.

How many financial marketers do you hear that start with an offer of income?

It sounds appealing, especially to those of us in or nearing retirement, but I don’t buy it.  In fact, I think it can be harmful to investors.  A fixation on income often leads to investor mistakes because “safe” income investments provide little income (today more than ever).  So if you stay with safe “income investments” your purchasing power insidiously erodes to inflation.

Often advisers/investors will then “reach” for higher yield and in the process swing too far the other way, assuming too much risk.  Perhaps with “high yield” bonds (i.e., junk) And the higher the yield, the riskier the investment is.  Or maybe they reach for more yield with preferred securities or high dividend paying stocks.

Look at what investors experienced in the iShares Dow Jones Select Dividend Index Fund (DVY).  At the end of 2007, 46% of the portfolio was in banks and other financials.  During 2008, the fund’s value fell 33%. (Today the fund has about 15% in financials.)  Also, dividend and income-producing investments held in taxable accounts can have payouts eaten up by tax bills.

Forget income.  Focus instead on asset allocation and a total return target that is consistent with your financial objectives and long-term plan.  The right amount of revenue will come as a by-product.

Living To 100 And Your 401K

If you are a married couple, age 65, your joint life expectancy is around 93 (50/50 chance one of the two will live to 93).  If you are an educated, white collar worker, it’s probably higher. One of you may make it to 100, so you should plan for needing about 3 decades of retirement income. And due to inflation your real living costs will rise considerable over 3 decades, not to mention un-reimbursed healthcare expenses. Further there will be less dependence on government entitlements and corporate benefits.

For example, in 1985, out of the 100 largest companies in the U.S. 89% offered their employees a guaranteed pension in retirement, by 2002 it is only 50% and by 2010 only 16%







For better or worse the 401-k will be the most practical way to fund for this kind of retirement. Almost anyone can have a 401k. If you work for a large or mid size company you probably have one - (if not, give me a call) and if you’re lucky a match from your employer as well.  Small companies can easily set one up and even if you are self employed you can start a Single K.

Finally, don’t forget about the ROTH feature, where you can contribute after tax dollars but the income that comes out – maybe for 30 years or more  - is all tax free!