Navigating Uncertain Times: A Financial Guide for High-Earning Investors
As we near the beginning of 2025, many investors are experiencing a bit of post-election anxiety about the financial landscape. Concerns about shifting political climates, volatile markets, and economic instability can make even the most confident investor feel uneasy.
But while uncertainty feels pervasive now, it has always been a part of the financial journey. What has changed is our access to real-time information, amplifying our awareness of potential risks. Rather than succumbing to fear, the key is to adopt a balanced approach that protects your financial stability while keeping long-term goals in sight.
In light of recent current events, we’ve put together this practical guide to managing your wealth through uncertain times—what to do NOW, what NOT to do now, and how to prepare for a prosperous future, no matter what the markets hold.
1. Check On and Build Your Cash Reserves.
One of the most effective ways to weather financial storms is to maintain a healthy cash reserve. Liquidity provides both peace of mind and flexibility, enabling you to adapt to unexpected expenses or seize opportunities.
High-Yield Accounts: FDIC-insured, high-yield savings accounts combine security with the advantage of competitive interest rates. This can be an ideal place to park emergency funds.
Conservative Investments: Consider allocating funds to low-risk options like U.S. Treasuries, money market accounts, and certificates of deposit (CDs). These vehicles provide safety while offering modest returns.
Having cash on hand not only stabilizes your financial picture but also ensures you can navigate life’s uncertainties without liquidating long-term investments prematurely. Remember, it is time in the market, not timing the market that matters. The longer you can keep your money invested, the greater power of compound interest. Interested to see how it works for yourself? Check out this compound interest calculator to estimate how much you could miss out on if you move to cash prematurely.
2. Stay in the Market.
When the market becomes volatile, the temptation to pull out and sit on the sidelines can be strong. This is a widely felt sentiment post-election no matter which side of the political fence on which you sit. But as is so eloquently put by Wes Crill,PhD, Senior Investment Director and Vice President at Dimensional Fund Advisors (DFA), in the November 2024 article, “Election Results Shouldn’t Dictate Your Investments,” “It’s important for investors to remember that whether you are optimistic or pessimistic about the future state of the world, you should be optimistic about the market.” Dr. Crill makes this point in great company and due to historical evidence that indicates this sentiment should ring true for all of us long-term investors.
A Historical Perspective on the Stock Market
Dr. Crill knows that history offers reassuring insights into the resilience of the financial markets. Over the past century, economies have faced wars, recessions, political upheavals, and global crises. Yet, the long-term trajectory of the market has consistently been upward.
While there are no guarantees, this historical context can help temper emotional responses to temporary setbacks. Just take a moment to think about times when optimism was in short supply, like the COVID-19 pandemic. “By the end of March 2020, the state of the COVID-19 pandemic painted a scary picture of what the future held for the economy and life in general. And yet, divesting from stocks at that point would have been an expensive mistake. From the market’s bottom on March 23 through the end of the year, the MSCI All Country World IMI Index returned nearly 74%, finishing the year higher in level than before the start of the pandemic,” includes Crill.
But for those focused on market returns, this one example may not be enough. It can oftentimes be helpful to look at the historical success of markets across presidencies.
With each presidency beginning in 1926 all the way through 2021, the markets continued to rise. Through both Democratic and Republican leadership, stocks have rewarded the disciplined investor.
For high-earning investors with long-term goals, staying invested is the wisest course of action. Not only do you put your money to work for you when you remain invested, but your investments act as a hedge against inflation, protecting the purchasing power of your wealth.
Attempting to time the market—selling at the top and buying back at the bottom—requires a level of precision that even professional investors rarely achieve. Staying invested through the ups and downs ensures you benefit from eventual recoveries and market appreciation.
Remember that your portfolio is built to grow over decades, not weeks or months. Avoid making reactionary decisions based on short-term changes in the geopolitical climate.
3. Do This, Not That: Exercise Financial Prudence
During times of economic instability, prudent financial management becomes even more critical. Small decisions can compound into significant advantages—or disadvantages—over time.
Minimize Consumer Debt: Avoid taking on substantial debt, especially for discretionary expenses. High-interest liabilities, like credit card balances, can quickly erode your financial flexibility.
Cut Overhead Costs: Evaluate monthly expenses and identify areas to reduce spending. Keeping your cost of living manageable provides breathing room in case of unexpected changes in income.
Delay Major Purchases: Postpone non-essential capital expenditures, such as a new car or home renovation, until the economic outlook stabilizes. Timing major investments during periods of volatility can be risky.
Prudence doesn’t mean depriving yourself; rather, it ensures you’re equipped to make well-timed decisions that enhance your financial health.
Additional Tips For Retirement Accounts
If you have investments in retirement accounts like 401(k)s with a long-term horizon (10+ years), resist the urge to convert to cash. While rebalancing might be appropriate, maintaining your market position is typically the wisest course of action. Timing the market for both exit and re-entry is nearly impossible and often counterproductive.
Final Thoughts
While it's natural to feel concerned about participating in the current financial system, remember that we're all participants in the economy simply by living and operating within it. The key is to make prudent decisions that align with both your financial goals and values while acknowledging the reality of our economic environment.
At Northstar Financial Planning, we always want our clients and extended network to know they have a financial professional on their side to help them weather whatever economic or political climate we face. So, if you’re new to our network, we encourage you to join our email list. We don’t share your information with anyone and won’t ever spam you.
Or, if you’re ready to partner with a fiduciary financial planner in Southern NH, we encourage you to check us out by scheduling your complimentary Discovery Meeting with us today.
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RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.
