Popular Articles

Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

read more
by Peter Eckerline
October 2008

Related Article

Payment technology evolution bringing further growth at Evolve Systems

Read more

Think twice: Don’t let politics drive your portfolio

Peter Eckerline,
Merrill Lynch:
952.476.5612
p_eckerline@ml.com
www.ml.com

EVERY FOUR YEARS, as the presidential election approaches, there is a great deal of buzz about the markets.

Historical trends have pointed to positive gains, and many investors are tempted to try to time their equities approach to make the most of the so-called election year market.

But as 2008 has proven to be a unique election year and the markets are not enjoying the typical election-year euphoria, investors may want to think twice about letting politics drive their portfolios.

Historically, the markets have done well during an election year. On average, the Dow has risen 7.55 percent between New Year’s Day and Election Day. Since 1896, the Dow has been up 19 times during presidential election years and down only eight times, according to a January 2008 report by CNBC.

There are some good reasons why a presidential election can swing the market to positive gains. In general, presidents tend to make the tougher, unpopular decisions in the first two years of their term, but political survival mandates they please the public as elections approach. But obviously, the economy is larger than the elections.

Political anomaly

There are many additional factors that affect markets’ performance in an election year. This is especially true in 2008, which is a highly unusual election year for multiple reasons.

Firstly, the 2008 election is a political anomaly. This will mark the first election since 1928, when Herbert Hoover defeated Al Smith, in which neither an incumbent president nor vice president will be running. According to some analysts, this has created a heightened level of political rhetoric and uncertainty. This political uncertainty also has the ability to create uncertainty in the markets, as investors wait to see what happens in November.

This election year is also unusual as the U.S. economy is experiencing volatility from many angles. Housing prices are dropping, the dollar is declining, unemployment is on the rise and there are fears of a recession. These factors will likely be far more influential than the polls as we get closer to November.

Clearly, there is a lot more at play than politics during an election year. Voters may be swayed by election-year economic policies, but investors should be wary of such moves.

Investors should never abandon a long-term strategy in favor of market timing. This is true during an election year, but is also a rule of thumb for smart investing. Indeed, the time in the market is more important than timing the market.

While political and legislative actions certainly can affect the performance of the markets, at the end of the day, market fundamentals have proved to be far more important. Allocation, valuations, earnings and the other basic determinants of performance will have far more effect on an investor’s portfolio than election outcomes will.

Sticking to basics

Focus on the things you can control and design a long-term portfolio that incorporates the tried-and-true investment basics:

•Risk tolerance: Determining your risk tolerance will help you findthe right balance between risk and return for your individualsituation. Your risk tolerance depends on several factors, includingyour financial goals, time frames, income and personality.

•Diversification: Diversification is a strategy designed to spreadassets among as classes or investing styles so  gains and losses may beoffset. For example, holding  stocks and bonds in your portfolio mayhelp to even out your returns during fluctuating market environments.

Of course, diversification and allocation do not ensure a profit orprotect against a loss in declining markets. The goal in designing yourdiversification strategy is to allocate your assets so that all of yourinvestments will not move in the same direction at the same time.

However, dividing your assets among stocks, bonds, cash and alternativeinvestments is only the first step of a diversification strategy. Youshould also consider further allocation to reduce any largeconcentration of assets in securities, sectors or styles.

•Allocation: Dividing money among stocks, bonds and cash is onlyhalf the battle. You also have to properly diversify within classes.Within the equity portion of your portfolio, for example, you have todecide if you want to invest in small, medium or large companies.

Also, once you know how much money you wish to invest in bonds, youthen have to select bonds in which to invest. You might selectinvestment-grade municipal securities for their safety andtax-advantaged income stream, or corporate bonds because they often offer ahigher yield in exchange for greater risk.

Proper diversification helps eliminate dangerous concentrations insecurities, sectors or styles, and helps you avoid timing the market’sups and downs, which is often a losing strategy.

Identifying the most appropriate allocation for yourself andperiodically reviewing that strategy will help keep you moving in theright direction and increase the likelihood of achieving your long-terminvestment goals and dreams. Remember, a qualified financial advisercan assist you in discovering the optimal allocation for yourportfolio.

Election years are often exciting, but it is important to remember thatyour portfolio should not depend on politics. Resist the temptation totime the markets, and your portfolio will thank you in November and foryears to come.