The current economic and political environment has some investors wondering if they should be adjusting their portfolios and whether Vanguard is reassessing asset allocation recommendations. Fran Kinniry of Vanguard Investment Strategy Group, and Todd Bechtel of Vanguard Personal Advisor Services, explain Vanguard’s investment philosophy for dealing with uncertainty.

Notes:
  • All investing is subject to risk, including possible loss of money you invest. Diversification does not ensure a profit or protect against a loss.
  • Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.
  • This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.
© 2017 The Vanguard Group, Inc. All rights reserved.


TRANSCRIPT

Amy Chain: Fran I’m going to toss this one to you. This one comes from David in Berkeley, California. David, thank you for the question. David said, “Is there anything in the economic or political environment that’s causing Vanguard to reassess its recommendation, its recommended asset allocations, and domestic or international allocation recommendations?” Fran, go ahead and give it.

Fran Kinniry:
Thanks, Amy, and thanks, David for the question. It’s one of the most common questions we’re getting. Obviously the news cycle is fast and furious. With the news cycle also comes a lot of different economic news and political news. And so the natural question is that what does that mean for me and my investment portfolio. We’ve done a lot of research here, so this is not just us thinking about things. We’ve studied different economic environments, whether it be a recession or a strong economic environment. We’ve also looked at different political regimes, depending on how the political environment is. And what we see there is that mostly, while it can be very in the moment, and drive a lot of attention, it really does not have a major impact on the capital market returns, whether it be returns or risk. And so our advice is really to try to make sure that you’re not allocating your portfolio differently because of the economic or political environment. And certainly that doesn’t mean you wouldn’t change your allocations, but that should be really something personal, something changes in your life, new goals and objectives, but really try to let the economic and political uncertainties stay in the news and not highjack your investment portfolio.

Amy Chain: In other words, you should be thinking about how changes in the political or other environmental climate, how changes there might allow you to stomach, or not stomach, things in your portfolio. If you can’t sleep when the political environment is rocky, maybe then you should think about whether or not you’re allocated correctly?

Fran Kinniry: Yes, that’s right. And I think I would be a little cautionary of predictions. So obviously what was expected to happen did not happen in the market. And also a lot of people were saying, if this did happen, you would see a lot of volatility. Just today is the 50th day that we have had the markets not go up or down 1%. So we’re actually in record low volatility, even though it may seem like political chaos. And so really not making the jump from political news cycle to capital market influence.

Amy Chain: Todd, let’s take a question from Rosalyn from California, who asked us a similar question to the one we asked Fran, but this one is more to the individual client level. “With such uncertain political times, how should an individual be setting their investment goals?” Let’s talk about your process and how you apply that to clients.

Todd Bechtel: Sure, and again thank you Rosalyn for the question. As a financial advisor with Vanguard Personal Advisor Services that’s exactly what my role is, initially is I partner with clients at Vanguard who want to work with an advisor. It’s to take it to a personal level. To find what their goals are, determine where they’ve been, how they’ve generated their wealth, take stock of their assets, where they’re at now, and then start to develop strategies. Start to develop goals. Less on money, more on values, more on legacy, more on what you want to accomplish, what concerns you, where do you want to go. And ultimately it’s really to take it to the next level and to put it into a plan, a written plan that we can hold ourselves to and use that to ride through that uncertainty.

Important information:
All investing is subject to risk, including possible loss of money you invest. Diversification does not ensure a profit or protect against a loss.
Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.
This webcast is for educational purposes only.
We recommend that you consult a tax or financial advisor about your individual situation.

© 2017 The Vanguard Group, Inc. All rights reserved.