MAKING CENTS: The election won't end all uncertainty for the markets

The next time you read this column, some of the uncertainty clouding the financial markets will begin to unravel.

We will know our next president, the Senate race will be over and the financial markets will begin the process of digesting the consequences of each.

But don’t think for a minute that these are the only issues that will continue to weigh heavy on all of the financial markets. Issues such as tax rates, interest rates, Europe and the Middle East will linger just like issues we haven’t considered yet shall arise.

You cannot control any of these issues. Yet if these issues keep you awake at night, fearful of the consequences to your tax bill, the rate of inflation or the return on your investments, address them one by one.

Start with the expiration of the Bush era tax cuts. If you feel that the increase in the capital gains tax rates and the increase in the taxation of dividends is more than you can tolerate, consider the consequences of selling now. These consequences may include the amount of current taxes that you’ll pay and the implications of this type of drain to your nest egg. It also raises the question of what to do with the money after you sell your holding.

Some feel that these tax increases alone may cause investors to reduce their exposure to these assets if the tax cost will rise so dramatically. And even if there are not more sellers than buyers to depress prices, others wonder whether these types of assets may be worth less in general because of the additional taxes to pay on the dividend income and eventual capital gain.

If your anxiety is from the possible volatility increase in financial assets as these issues come to a head, assess the consequences of both selling and holding. Ask yourself what type of annual returns you need on your nest egg to reach savings objectives? If you need a rate greater than what is available in today’s low interest rate environment, but simply can’t stand the volatility, then look at how much you may need to reduce your monthly spending in order to minimize your mental anguish.

At the end of the day, there are only a few items that matter. They start with who you are and what you want to do with your time. Beyond that, the financial issues that you control and will matter the most in your financial future are how much you make and how much you spend. Don’t guess, know what you spend each month.

How much you save and how much you earn on those savings is the second component.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.comor on Facebook as JohnPNapolitano and US Wealth

John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

Securities offered through LPL Financial, Member FINRA/SIPC.

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