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Don't let election fear drive your asset allocations: expert

Yahoo Finance’s Alexis Christoforous and Brian Sozzi discuss what investors can do amid market uncertainty with Mariner Wealth Advisors Managing Director, Jana Shoulders.

Video Transcript

BRIAN SOZZI: Investors are watching for the potential for more fiscal spending in coming weeks after President Trump announced contradicting plans for stimulus on Twitter last night. Jana Shoulders is managing director at Mariner Wealth Advisors and joins us now to discuss how to prepare your portfolio amid this uncertainty as part of our Financial Advisors Corner presented by PIMCO.

Jana, good to see you this morning here. So how are you advising your clients? So much uncertainty out there. What advice are you giving them?

JANA SHOULDERS: I think we are telling people not to try to be heroic, not make knee jerk decisions, and certainly don't let this uncertainty of the election change your long-term focus and your asset allocations. It doesn't mean that you haven't appropriately addressed what your comfort for cash or whether you're comfortable putting new cash to work.

I know we talked about that on a previous segment here on the show, that a lot of people are somewhat paralyzed. And what we try to do is focus back on the fundamentals, which is even if we have a Democratic sweep and have all of our Congress and our presidential office held by Democrats, historically the S&P 500's performance from '33 to 2019 would tell us that still is a 9% average annual return.

So we shouldn't let the fear of what the election's outcome be drive our asset allocations.

ALEXIS CHRISTOFOROUS: Jana, we are in an environment of low yield right now, probably will be for the foreseeable future. So what are you telling clients about where they can go to find a little income in this market?

JANA SHOULDERS: That is a really popular question, and a tough challenge now. You know, we do advocate for a total return strategy with our clients. But there's no question that income is very important for retired people. It's also a peace of mind to know that your distributions and your living expenses are getting covered somewhat by income.

And in this low rate environment, we're not big advocates of chasing yield with a lot of risk, as in high yield bonds being a disproportionate part of your portfolio. But what we do like is adding a covered call strategy, perhaps to an enhanced dividend portfolio where you can target something in the 5% to 6% range over time. We feel like that can add some income to our portfolios with a controllable amount of risk.

BRIAN SOZZI: Jana, for those clients that are concerned about their taxes going up should we see a change in the White House, what's your advice to them? What steps should they take to protect their portfolio?

JANA SHOULDERS: That's a big focus right now, which is, regardless of the outcome of the election, I think we're all in agreement that taxes are going to go up. Because we are going to need to pay for what we're creating in the form of debt.

I think that's a twofold question. There's the income tax aspect of if taxes are going up, does that mean you want to go ahead and recognize some income this year? It also is an impact from the estate tax perspective, which is if we know we have an existing exemption of $11.58 million for estate tax, maybe we want to use some of that. Let's take advantage of it instead of saving it or taking a chance that we could have a change next year which could be retroactive.

We know now that that's a risk, that just because the law might not get pushed through until later in 2021, they couldn't make it effective January 1st of 2021. So we're really advising our clients to be very proactive with the estate planning, as well as the income tax that can affect their portfolio.