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Managing your retirement portfolio during an election season

Alex Reffett, East Paces Group Principal, joins The Final Round to share tips on adjusting your retirement portfolio during an election season and in volatile markets.

Video Transcript

SEANA SMITH: Welcome back to The Final Round. It's time for our retirement segment brought to you by Fidelity Investments. So stocks today losing some steam. We have the S&P and NASDAQ both closing at their lows of the session. So with just 2 and 1/2 weeks to go until Election Day, how should you position your retirement portfolio?

For more on this, we want to bring in Alex Reffett. He's the Principal and Co-Founder of East Paces Group. And Alex, great to have you on the show. Just first, let's talk about how are you advising your clients? What are you advising your clients to do with about 2 and 1/2 weeks left till Election Day, and we also have coronavirus cases ticking up across the US?

ALEX REFFETT: Yeah, thanks, Seana. You kind of nailed it on that second point. The politics tend to be more of an emotional conversation. Every election cycle comes around, you've got a country on its heels and a lot of people that are going to be disappointed, one way or the other. So you've got some emotional trading that generally happens around an election cycle.

But actually, you know, this year, COVID has really been the driving factor in the economy, obviously, and still is. You know, it's kind of very analogous to Obama's first term, where instead of the presidency being the biggest economic issue, you had the financial crisis back then. So I think COVID and the stimulus possibilities that may come from it are more of the real economic impact over the next few months.

SEANA SMITH: So with that in mind, what are you telling your clients to do right now, just in terms of how they should position themselves because there are so many-- so many uncertainties out there? Like you said, it's beyond just the election. We have coronavirus. There's no clear path as to when exactly we are going to get a vaccine and how readily that essential vaccine is going to be available. So when we think about the fact that we could see more volatility now for quite some time, what should people be doing with their retirement portfolios?

ALEX REFFETT: Sure. Well, I mean, any major event, whether it's an election cycle or a viral outbreak like we've had, you need to be rebalancing your portfolio on a relatively regular basis because times change. There's companies that come and go and sectors that come and go. We have been a believer for a long time that we're in a technology bull market. Obviously, this year has demonstrated how resilient technology is.

You know, obviously, there's a lot of things that are actually more profitable in a world where people are a little bit more disconnected socially and leaning a little bit heavier on the technology side. So I would say it's always important to have someone rebalancing your portfolio, looking at what's happening in the world, and identifying where value is. And it's not going to be a surprise to me if technology continues to be a place of value over the coming decade.

RICK NEWMAN: Hey, Alex. Rick Newman here. Would there be anything wrong with shutting off access to your portfolio and not even looking at it until February 1, 2021?

ALEX REFFETT: Yeah, yeah. I mean, the good old sell in May, go away, you know, just another version of that. I think-- honestly, I think people looking at their portfolio relatively infrequently if they've got somebody managing it is probably one of the best things they can do. It's like climbing a hill and looking at a yo-yo as you're walking up, it'll kind of make you dizzy. There's-- there's not a lot of value to staring at it day-to-day unless, of course, you're managing it yourself.

But even if you are, you know, if you're buying valuable things, you can't be focused on the volatility of them on a day-to-day basis. You've got to be thinking where's the world going, what are people moving away from, what are people moving toward from an economic perspective, and making sure you're in those places for the better part of decades, not necessarily on a day-to-day basis. So yes, I would always be in favor of people buying valuable, sensible investments and trying not to pay attention to them day-to-day.

DAN HOWLEY: Alex, this is Dan Howley. I want to ask if you have any, I guess, strategies for people who are looking to avoid any potential down activity, downward activity we see from the tech sector? As the economy starts to bounce back or when that happens as far as people being able to go back outside or go to their offices, you got to expect we'd basically see a rubber band effect. So I guess, what do you think people should do for their retirement funds as far as that goes? Should they try to rebalance them themselves? Or should they just allow it to go through whatever kind of company that they have their 401(k) with, for instance?

ALEX REFFETT: That really depends on the individual and how far they are from retirement. Obviously, it's hard to give general advice in that framework because everyone's a little bit different. But what I can say is that you really want to make sure that you've got a portion of your portfolio, I usually recommend at least three to five years, in something that's liquid and not going to be affected by market volatility.

And what that gives you is the ability to let the rest of those assets ride. You know, you look at the longest, the worst of recessions and how long they last, and you really want to have your equity bucket, you know, in a position to where you don't need to be selling during a three-to-five-year window. So if you've got enough cash for your living expenses for that period of time, if you're approaching retirement that's really all you need.

The difficult part is is the conventional bond bucket, where people used to be able to allocate 30%, 40%, 50% of their portfolio to as they approach retirement is a little bit tougher these days, because interest rates just came down again this year, and they pay you basically nothing. So really, people are having to lean on cash. And the short and sweet of it is, if you need $50,000 a year to live in retirement, then I'd recommend you've got three, four, five years of that cash supply laying around if you're about to retire. If you're younger, not planning on touching it, you've got a secure job, I'd hardly worry about it at all.

SEANA SMITH: All right, Alex Reffett, Principal and Co-Founder East Paces Group. Great to have you on the show. Have a good weekend.

ALEX REFFETT: Thanks for having me.