It can be risky to base your investment philosophy off of which political party may or may not win the upcoming election. Read the following article for sounds tips on staying grounded during election time.

Real World Politics Meet Real World Investing

visit Forbes.com to view the original article

This is the time of year when you start to see investment ideas based on predictions of the US Presidential Election. There are lists of stocks that should or could go up under a Republican administration and a companion list of companies that are predicted to rise under a Democratic administration.

Personally, I don’t think selecting specific stocks tied to the outcome of an election is a very good idea.  While investors could select the right stock for the right reasons, there’s too much company specific risk in any given stock:  loss of a key supplier, scandal, management changes, unfavorable currency fluctuations. And many election issues are not simply resolved by who ends up occupying the White House—far more complex analysis is required.

The free market, in theory, can do some of this homework for you. These same election issues are already being voted on daily, ahead of November 6, in Benjamin Graham’s “voting machine” across many companies.  Motif Investing recently published 21 thematic indexes—called motifs—to “poll the votes” ahead of the election: everything from Obamacare to Cleantech. This policy-tracking isn’t completely scientific, not yet at least, but politically-oriented motifs offer a window into how each Party’s policy positions are playing out in real economic terms, which for self direct investors, could prove to be a useful tool.

The top performing Republican issue motif index for the last month was Guns, Guards and Gates, up 2.5% for the month and 15.9% for the year. This index includes companies such as Smith & Wesson (SWHC), Tyco International (TYC), Alliant Techsystems Inc. (ATK) and other security companies.   Although the President has not done much to affect relevant laws, guns is always a safe get-out-the-vote issue for the Republican base.

Likewise, the top performing Democrat issue motif index for the last month was Senior Care that includes companies such Medtronic Inc. (MDT), Fresenius Medical Care AG & Co. (FMS), and DaVita Inc. (DVA). It is up 2.9% this month and 27.7% for the year. With Obamacare front and central in this election, this index tracks the companies that benefit from a growing insured ranks and an aging America.

In addition to the specific issues, this is an election about big money donors. President Obama and Governor Romney could end up spending over $1B each on this election. Just as some polls show President Obama with a slight edge, the Democratic Donors motif index is ahead of the Republican Donorsmotif index. Specifically, Democratic Donors that includes stocks like Time Warner (TWC), Google (GOOG) and Microsoft (MSFT), is up 2.6% for the month, up nearly 33.5% in the past year.  While the companies in Republican Donors which includes Goldman Sachs (GS), Exxon Mobil (XOM) and Sheldon Adelson’s Las Vegas Sands (LVS) —increased 1.3% over the past month and 25.3% over the past year.

Unfortunately, no matter who wins the election, many Americans believe that the country is going to remain polarized into haves and have nots, with neither the Republican or Democratic agenda dictating the business climate. For that the Income Inequality motif index tracks stocks that caters to the 1% and the 99%.  This index consists of luxury retailers like Saks (SKS), Tiffany (TIF) and Ralph Lauren (RL) as well as deep discount retailers like Big Lots (BIG) and Dollar General (DG).  It is down 0.1% for the month, but up 20.3% for the year.

Tonight many of these issues will be on display in the vice presidential debate between Paul Ryan and Joe Biden.  There will be lots of chatter and noise the next day from pundits, with the somewhat ironic result that real clarity may be hard to come by.  I will instead be watching how investors vote with their buys and sells. Especially until the real votes come in on November 6.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

With the next presidential election quickly approaching, many investors are concerned about the impact the election will have on their investments. This article reminds investors to keep an overall long term strategy versus focusing on the immediate political impact to the economy.

This Year’s Election Proves Politics And Investing Don’t Mix

visit Business Insider to view the complete article

The battle for the White House is beginning to heat up, and no one feels the burn more than investors, who plan to move assets in the next six months.

That’s according to a survey released on Thursday by financial services firm Edward Jones, who found that 90 percent of investors are wary of what the next president will do to their nest egg.

“We didn’t expect 90 percent to say they’re making changes,” Kate Warner, investment strategist at Edward Jones, told Your Money. “But economics drives investment decisions, so if you tie politics to this, it makes sense.”

We asked Warner to elaborate on the survey and explain the fear that’s been driving investors’ decisions around this time.

Tax concerns. Though Warner believes most investors “aren’t paying close attention” to what either candidate is saying, both Obama and Romney have warned that if the other guy is elected, voters will see higher taxes. “I think that’s registered (with voters) and reinforced this fear among higher income respondents,” says Warner.

The recession. Both candidates play up the sluggish economy in their rhetoric, using imagery that’s sure to elicit fear and raise tempers—think unemployed factory workers, struggling families, and spoiled rich kids. “It’s making people feel worse,” says Warner, so “they want to be more conservative in their portfolio,” putting more of their assets in bonds than in stocks. “However bad you think the economy is, listening to the campaigns makes it worse,” Warner notes.

Sweeping changes. The notion that whoever wins the election will push the country in a different direction is a prevalent one, says Warner, and it’s enough to scare investors into making some drastic changes.

Regardless of who gets elected, however, Warner urges investors to “think long-term” and “not mix politics with investing.” As we’ve noted before, making an investment decision that’s based on emotion, and particularly fear, could lead to loss and regret later on. It’s better to ground decisions in rational thought, or as personal finance guru Carl Richards would put it, to focus on the process and not the outcome.

“Some people might respond by thinking they need to do something different, when in fact, that may be a mistake,” Warner says. “It’s important to remember that while the election will be in the history books, people’s portfolio’s need to last a lifetime.”

The long-term growth of the economy and your earnings will matter more over time.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

chart courtesy of CNNMoney

The effects of the European debt crisis on the U.S. stock market are undeniable. The following article outlines what you need to know and what the outlook is for investors. 

Market’s biggest risk? Duh. It’s Europe.

by Hibah Yousuf
visit CNNMoney to view the article

NEW YORK (CNNMoney) — It’s been on and off the back burner for a year and a half, but the European debt crisis is finally nearing a boiling point.

In fact, more than 80% of the experts surveyed by CNNMoney agree that the money problems across the Atlantic are the most challenging hurdle for stocks, which have been struggling to claw back from the lows they hit earlier this month.

“Europe’s debt crisis is the No. 1 risk facing the market right now,” said Fred Dickson, chief market strategist at D.A. Davidson & Co. “Each step made toward solving the sovereign debt or bank reserve issues seem to raise new question, and the news suddenly changes from being very negative to very positive and vice versa.”

Investors first became troubled by the eurozone’s fiscal woes in early 2010, as worries about Greece defaulting on its debt spread to the other so-called PIIGS, including Portugal, Ireland, Italy, and Spain.

Policymakers were able to ease those concerns with bandages of bailouts and austerity measures, and events like the Arab Spring helped distract investors, at least temporarily. But the crisis continued to escalate and has gripped investors’ attention for months.

Europe’s debt crisis: 5 things you need to know

Lately, every time any incremental progress has been made toward solving Greece’s debt problems or the spreading European crisis, investors react with a surge of optimism and stocks rally.

But when political conflict or rating downgrades take over the headlines, it’s like splashing cold water on that optimism and stocks tumble.

Amid all the mood swinging, the S&P 500 has mostly been moving choppily sideways between 1100 and 1200.

“If we see some sort of plan or deal that settles Europe’s issues, that will relieve a lot of the uncertainty that markets hate [and] stocks will be able to break out of the range to the upside,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

But that may still be a ways off. Late Tuesday, Slovakian lawmakers rejected a plan to overhaul the European stability fund. Slovakia was the last of the 17 eurozone countries to vote on changes to the fund, and the only country to reject those changes.

Even a Greek default, which is now widely expected, would help ease tensions, he added.

“With all the negative priced into the market, a default by Greece wouldn’t be the end of the world,” Detrick said. “In fact, it could be a potential positive to get some uncertainty out of the way.”

CNNMoney survey: Where the markets are headed

Investors would breathe an even bigger sigh of relief if European leaders announce a plan to recapitalize the banks that have exposure to Greece and other debt-laden countries.

“What we want to see is essentially what would be a TARP fund to finance and isolate the bad assets at banks, like Belgium is doing with Dexia,” said D.A. Davidson’s Dickson.

Last weekend, the leaders of Germany and France, Europe’s two largest economies, said they’ve agreed on a “comprehensive package” of measures to address the eurozone sovereign debt and banking crisis, but were tight-lipped about the details. The plan is expected to unveil at the G20 meeting in Cannes Nov. 3 and 4.

Meanwhile, European Commission president Jose Manuel Barroso is expected to announce his own recapitalization plan Wednesday afternoon.

As long as the risks of a contagion are contained, Europe’s debt crisis should move out of the limelight, allowing investors to focus on the U.S. economy and earnings. But that doesn’t mean it won’t creep back in later.

“We’ll be talking about Europe for the next five years probably,” said Dickson. “For the situation to really abate, there need to be signs of better economic growth in southern Europe — Greece, Spain, Italy and Portugal.” 

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

photo by Philli Casablanca

As seen on Utah CEO Magazine’s Blog
Written by Dave Young, President of Paragon

Forecasts make interesting conversation and trivia. Just don’t use them to try to make money.

There’s no shortage of self-proclaimed market prophets. You can find them in the investment magazines, newspapers or on CNBC. The problem is that when investors listen to their forecasts, many believe them because they are broadcasting using national media, which is credible, right? No!

After 22 years of managing money for clients in the stock market, I have found that market forecasts continue to be false over and over. I’d like to give you three reasons why you shouldn’t listen to them:

1. Although market forecasters can be entertaining, they provide no real investment value. Market forecasters do not help anyone make money. In fact, investors who follow them are more likely to lose money than to gain it.
2. The market guru, seer, pundit or executive continually makes forecasts in an attempt to gain public attention. The way the forecasting game works is that the market guru, seer, pundit or executive continually makes forecasts in an attempt to gain public attention. By sheer luck, maybe half of these predictions are proven right — meaning that at least half of them are wrong. On the occasions when the forecast turns out to be correct, the forecaster plays it up. Those many forecasts that don’t pan out (and those many investors who are financially hurt by them) are never spoken of again.
3. You’re much more likely to get an accurate prediction of the future by listening to the weather forecasters. At least the weather forecasters inflict less damage when they’re wrong.

Ned Davis Research and InvestTech Findings

Ned Davis Research and InvestTech collaborated to analyze the forecasts of some of the most highly paid and highly regarded market forecasters in the financial industry. This is a small sampling of the findings.

In the January 14, 2008, edition of By the Numbers from Direxion Funds, they published a report showing how the forecasters did last year. The year 2007 appears to be a different year, but the same story. One thing the forecasters can claim is consistency because they are consistently WRONG!

• The average prediction made on January 1, 2007, by 58 Wall Street forecasters for the yield on the 10-year Treasury note as of year-end 2007 was 4.88%, an increase of +0.17% over its 4.17% level from December 31, 2006. Instead, the actual December 31, 2007 yield did not rise from a year earlier, but fell to 4.02% (source:  BusinessWeek).
• 82% of money managers believed in late December 2006 that long-term interest rates in the US would be “unchanged or higher 12 months later.” The yield on the 30-year Treasury bond was not “flat to higher” but rather declined from 4.81% to 4.45% during calendar year 2007 (source:  Merrill Lynch).
• 56 economists who were surveyed in mid-January 2007 predicted that the average price of oil would be $58 a barrel in the 4th quarter 2007, down $3 a barrel from its $61.05 price of December 31, 2006. However, the price of oil did not fall, but rather rose +57% during 2007, closing last year at $95.98 a barrel (source:  USA Today).
• The S&P 500 was up +9.2% YTD (total return) through Friday, July 20, 2007, closing at 1534. The headline in Barron’s over that weekend stated, “It’s Still Time to Buy” forecasting an additional +6% rise to 1625 by December 31, 2007. Instead, the stock index fell 4.3% to finish 2007 at 1468. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source:  Barron’s).

Also, from a long-term historical perspective, here is some more interesting “market forecast” trivia. This is also courtesy of Direxion’s By the Numbers publication:

• On the morning of October 19, 1987 — the trading day that ultimately resulted in the largest one-day percentage loss in the history of the S&P 500 — the Wall Street Journal ran a front-page article with the subtitle “Some Stay Bullish, Believing Downturn is Temporary.” The S&P 500 fell 20.5% that day (source:  Wall Street Journal).
• On August 13, 1979, BusinessWeek ran a cover story titled “The Death of Equities.” The S&P 500 closed at 107 on August 13, 1979. The S&P 500 closed calendar year 2007 at 1468. Apparently, equities didn’t die…(source: BusinessWeek).
• At the close of business on Wednesday, October 9, 2002, the S&P 500 bottomed at 777 before beginning a bull market run that gained +101% to peak at 1565 on October 9, 2007, exactly five years to the day after the bear market bottom. The headline in the business section of USA Today on Thursday morning October 10, 2002 was “Where’s the Bottom, No End in Sight.” (source: USA Today).

These findings may seem shocking to someone encountering them for the first time, but they are far from atypical. This is just a small snapshot of how bad the market forecasting business really is. Yet despite mountains of data that show how ineffective the celebrity market forecasters are, they continue to make their predictions and many unfortunate people continue to base their financial decisions on shoddy, unproven advice.

So, if forecasts are a waste of time then what does work? After 22 years of managing money, I am convinced that investors will only succeed when they are able to remove emotion from the investment process. Gut feelings are not a reliable investment strategy — even the gut feelings of so-called experts.

Our clients at Paragon Wealth Management can be confident that their portfolio isn’t being managed by some celebrity market fortuneteller. Our quantitative models enable us to impartially measure what is actually happening in the market and how much risk there is at any point in time. We constantly evaluate the models to determine how effectively they are working. In my opinion, this is one of the best ways to invest for long-term success.

About the Author
Dave Young started his career as an entrepreneur after graduating from Brigham Young University in 1980. He successfully started 12 businesses and decided to sell them in 1986. He wanted to invest the proceeds, but was unable to find an investment company that met his needs. As a result, he started Paragon Wealth Management later that year. Today, he has cients throughout the United States.  

To learn more about Paragon Wealth Management call 801-375-2500 or visit www.paragonwealth.com.