The Looming Fiscal Cliff

By David Geller   |   November 10, 2012

Whether you are jumping for joy or in the depths of despair, you may be wondering what the likely financial impact of the election result might be on you and your investments.  While the election results have just begun to sink in, we have been considering these questions for several months. We will present each of the economic, fiscal and tax challenges that could influence an investor’s portfolio in a series of short articles over the next few weeks.

The Fiscal Cliff looms large on the immediate horizon.  Automatic spending cuts and tax hikes that will take effect in January 2013 unless Congress and the President agree on a less drastic course of action before then.  Avoiding the potential negative impact of these automatic cuts and tax hikes likely are among the top concerns for an investor.

However, we believe that a compromise will be reached.  While some seats changed hands, the election did not end the political gridlock.  Though likely difficult, we believe our leaders will reach some compromise.  They are likely to do so to avoid a devastating blow to economy and the financial markets.  While none of us can control Congress or end the political bickering, you can protect a portion of your portfolio from a short-term drop.  There are ways to hedge your portfolio or in other words to put in place an “ insurance” option for your portfolio. However, there are costs associated with purchasing insurance that may influence your long term rates of return. Not dissimilar to making choices while purchasing a car insurance, you may choose to purchase the right amount of portfolio insurance that is tailored to your investment risk and return profile. If you are interested in reviewing details about a put strategy or discussing current pricing in the marketplace, we encourage you to contact your financial advisor who can educate and help structure a solution for you that is suited to serve your needs.

About the Author

CEO David Geller co-founded the firm in 1991 and led the creation of Behavioral Wealth Management. Recognized on numerous prestigious "top financial advisor" lists, David is an in-demand speaker for professional groups and JOYN workshops. His writings have appeared in The New York Times, The Wall Street Journal and The Huffington Post.

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