3 Portfolio Moves to Consider Before the 2024 Election

I like bringing order to chaos—or at least trying to. I make lists. I dig spreadsheets. I map out a week’s worth of dinners in advance. And I can tell you exactly what I’ll be wearing tomorrow, since I’ve already planned that out, too.

I know I’m not alone—many of us like to control what we can, particularly in the face of uncertainty. And we’re facing plenty of uncertainty today, including global tensions, economic challenges—and a US presidential election just weeks away.

Indeed, elections typically lead control freaks to wonder what we should be doing before the first Tuesday in November―and not just with our ballots, but with our money, too.

My level-headed, thoughtful colleagues have urged us not to let the election derail our long-term financial plans. “From an investment perspective, I’d argue that it’s better to tune out the noise,” says Morningstar portfolio strategist Amy Arnott. “Instead of attempting to answer questions that are fundamentally unanswerable, it’s critical to remain focused on the questions that really matter—those that focus on your own financial goals.”

However, for those investors who feel like they just need to do something portfolio-related before Nov. 5, here are a few ideas to consider.

Make Sure You Have a Cash Cushion

We experienced a good dose of market volatility last quarter, and we’re likely to experience more going forward, especially if there’s a lot of uncertainty about the political outcome. It’s therefore key to make sure your emergency fund is sufficiently stocked—you don’t want to have to sell investments (especially during a market dip, which isn’t out of the question) to raise cash for unexpected expenses. Also, be sure that you have any special near-term cash flow needs included here, too―such as paying for a wedding or a home down payment in the next six months.

Having sufficient cash on hand is especially important for those nearing or in retirement. When discussing her bucket portfolio strategy for retirement, Morningstar director of personal finance and retirement planning Christine Benz recommends parking money for living expenses covering the next two years in cash―that’s Bucket 1 in her retirement portfolio system. She suggests that retirees maintain emergency funds, too. “Unplanned expenditures like a new roof, auto repairs, or big vet bills can crop up in retirement just as they do when you’re working,” reminds Benz. Retirees can either include a cash buffer for these costs in Bucket 1, or they can maintain separate emergency funds to cover them.

Double-Check Your Diversification

If you’ve created an investment policy statement outlining how you’ve positioned your portfolio and triggers for making changes, be sure that you bring your portfolio back in line with that plan if, in fact, it’s out of whack. Let your policy drive your portfolio.

Specifically, be sure your portfolio’s asset allocation matches the target you’ve set. Your portfolio may be heavier in equities than you intended, particularly if you’ve been a hands-off investor during the past several years. Given how well US stocks have performed relative to other markets, you may also find that your once geographically diverse portfolio is more domestic than you had planned, too. And be sure to check your style preferences: The dominance of growth strategies versus their value counterparts during much of the past several years may mean your growth/value split needs rebalancing.

Consider Converting to a Roth

Many tax experts say there’s no better time than now to convert some traditional IRA assets to Roth IRA assets. In doing so, an investor will pay taxes now, in what most agree is a reasonably low tax rate environment, rather than pay taxes later in an as-yet-to-be-determined (but perhaps less friendly) tax climate.

Why now, specifically? Because the tax cuts included in 2017’s Tax Cuts and Jobs Act are set to expire at the end of 2025, unless there’s legislative action to extend them. And that means higher tax rates for most households in 2026.

Roth conversions are tricky, so consulting a tax professional for guidance should be step number one in your game plan. And while you may want to research whether a Roth conversion is right for you before the election, tax expert Ed Slott suggests waiting until early December to act if you find a conversion is a good choice for you. Remember, Roth conversions are permanent and can’t be undone; once you convert, you’re committed to pay the taxes on the conversion. As such, you want to make your final decision only after you have the most accurate projection of your 2024 tax liability, which should be reasonably clear by early December.