With politics being everywhere in this heated time, it’s natural to wonder, do politics belong in your financial plan? A recent article in the New York Times looks into just this question.

The key point: as an investor, your advisor’s views should have no part in your plan. At HIG, you and your personal wealth goals are what matter to us. If you want your politics to be a part of your future goals, we will help you decide how to do that. Our politics will not enter the picture. 

If you are not a client of ours, and are worried that your advisor’s political outlook is influencing their advice to you, here are some suggestions taken directly from NYT the piece: 

• If you think politics factor into your adviser’s strategy for your nest egg, ask for explanations. A good retirement planner will be able to articulate how the actions taken by politicians can — and can’t — affect your portfolio.
• When emotions are running high, resist the urge to dismiss your adviser on the spot — a knee-jerk reaction when it comes to your retirement security isn’t a great idea. Don’t do anything that’s not part of a long-term investing strategy.
• Talk to your adviser about how specific economic policies affect your portfolio. Politics might be about people, but your investment decisions should be informed by the ramifications of, say, bond-buying or tax-code changes.
• Try to keep an open mind. A different viewpoint from one you hold might give you valuable insight for your long-term savings goals.
• If you want to integrate your political views more directly into your retirement planning, some advisers suggest working with someone who has knowledge and expertise in E.S.G. (environmental, social and governance) investing strategy.

At HIG, we have a single-minded focus on putting the odds of your long term success in your favor. And, as fiduciaries, we are legally bound to work in your best interest. Period. We are passionate about what you need from your plan to help you live the life you want, and give you peace of mind. 

So, our message during this period will sound familiar to our long-term followers: focus on what you can control, keep calm, and take the long view. Your nest egg and legacy will thank you.

Read the NYT piece here.

If you’ve been hunting around our website recently, you might have noticed a link to our Client Relationship Summary (Form CRS).  This new regulatory document helps investors answer the question, “Is Hill Investment Group the right investment advisor for me?” It’s aimed at anyone who is curious how we can help. 

In our opinion, it’s a great move by regulators. It makes important information about advisors and broker-dealers crystal-clear, like fees, services, disciplinary information, and their fiduciary obligation (audio clip). As an existing or prospective client, we encourage you to check it out. You might learn something about us you didn’t know before, maybe even ways in which we can be more helpful to you!

After 10 years of large companies earning record-breaking returns, any reasonable investor would start to wonder, are small companies even worth hanging on to? We argue yes. Why? Because evidence shows owning small companies pays you more over time and helps your portfolio recover better after a downturn, but only if you have the patience to wait. 

Higher expected returns. Evidence shows that small companies have historically outperformed large companies over the long-term. The reason? The market perceives small companies as riskier investments. The extra return you get is the market paying you for taking on that risk. If you think about it, this is intuitive. A simple example: would you lend money to the mom-and-pop diner down the street at the same interest rate as you would to McDonald’s? Of course not. You recognize the additional risk inherent in the smaller, less established diner compared to the more stable, global, fast-food chain.

Stronger recovery after a market correction. When the market declines, small companies tend to perform worse than the general market, and investors may start to question if this asset class is one worth hanging on to. The biggest concern we hear is that smaller companies have less capital and cash flow to weather the economic storm thereby making their recovery painfully slow. In reality, small stocks have a tendency to come back stronger and faster after a significant market correction. The data in the table below suggests a healthier small company recovery (Russell 2000) compared to large (S&P 500) over three of the largest market downturns in the last 40 years. 

The role of patience. The additional return you get for owning smaller companies can materialize at any time. But we know, especially in times where large has outperformed small for a decade or so, having the patience to wait can feel next to impossible.  This is where the role of an advisor is key.  It’s only natural after years of underperformance to want to bet on whatever feels like the winning horse. Without having someone to hold our hand any of us, including professionals who know better, have a hard time waiting it out. Our take on all of this: While we see many non-client investors run from small stocks, this as an opportunity for our clients to buy what’s on sale and reap the long-term rewards of remaining disciplined.