Election Year Economics – How Policy Changes Can Impact Your Finances

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Amber Posthauer: Hello, everyone! Thank you for joining us today. We're going to get started here in 60 seconds to allow for everyone to get connected. We'll get started shortly.

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Amber Posthauer: Welcome, everyone, to Election Year Economics, How Policy Changes Can Impact Your Finances. Thank you all so much for joining us. Please send questions through the Q&A located on your Zoom menu bar, and we'll try our best to answer all of your questions.

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Amber Posthauer: Today's presentation is being recorded, and the recording will be shared in the coming days. At this time, I'd like to hand over the call to our speaker. Mack, the floor is yours.

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Mack Farley: Thank you, Amber. Yes, good afternoon, everyone, and thank you for joining the call today. My name is Mack Farley, I'm a Senior Advisor with NFP Wealth Management, and I also sit on our investment committee

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Mack Farley: where I work with individuals, families, business owners, and plan participants across the country when it comes to investment management, financial planning, and retirement planning.

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Mack Farley: So, I've spent the last 10 years helping all sorts of investors navigate, bull markets, bear markets, the good and the bad when it comes to their investment portfolios and their financial plan. And so, when I mentioned I was doing a presentation on

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Mack Farley: Election Year Economics. I've gotten a lot of mixed feedback, because I think, generally speaking, this is…

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Mack Farley: Tied to the political environment, but really focused on… on data when it comes to managing our own finances and, you know, how we're interacting with our investment portfolios and our

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Mack Farley: financial decisions. And so, you know, generally speaking, including this year, election years really have an ability to dominate the news headlines. I'm sure you've all watched

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Mack Farley: The news or social media popping up with

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Mack Farley: different predictions for the upcoming midterm elections in November, and depending on the type and format.

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Mack Farley: there might be leading indicators to say if X, Y, and Z happens, then so-and-so may play a role into your personal life, into your financial life, or into your professional life.

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Mack Farley: So I think before we dive in, I just wanted to…

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Mack Farley: Clarify that this is very much an investment

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Mack Farley: focus presentation as we dive through the history around election year economics and the financial impact that it's had in different environments. And so a lot of people, as we head into the fall, and clients that I work with.

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Mack Farley: have been commenting or generating questions around, should we be making changes? You know, should we move to cash in our portfolios?

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Mack Farley: Or should we wait to invest, until after the elections, once we have more certainty? And so today, we'll walk through a lot of those questions and hopefully provide some clarity on how you can think about your own finances and your own investment portfolios.

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Mack Farley: As it relates to the midterms coming up in November.

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Mack Farley: And so, to start, you know, today, as we look at historical midterm elections, what you'll see here on the chart is that a lot of times, midterms tend to

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Mack Farley: To turn the other way from the primary elections when it comes to the current presidential seat, winning or losing

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Mack Farley: seats in the House and the Senate, and so this chart

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Mack Farley: Generally, you'll notice over the course of time since 1934,

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Mack Farley: We've had only 3 occasions when the presidential administration has gained seats in the House, with the majority of the time losing seats, and sometimes in a large fashion.

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Mack Farley: regardless of which presidential party is in office. And so I think what this speaks to a lot is how

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Mack Farley: Investors and how… and how voters are really viewing

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Mack Farley: The change, and, you know, as we come into the midterm elections, a lot of people overreact or react to what current policies are in place, and are constantly looking for change, when it comes to the political environment.

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Mack Farley: And so, if I jump forward.

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Mack Farley: Here, you'll notice the top graph

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Mack Farley: Shows, generally speaking, midterm election years

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Mack Farley: Our worst years in the stock market than the other 3 years

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Mack Farley: From a historical standpoint. So, since 1931, midterm election years have only averaged about a 4.7% rate of return in the U.S. stock market.

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Mack Farley: Now, looking at the other years.

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Mack Farley: there's been a 9.5% average annual return. And so what this really tells us is that, you know, midterm election years can be volatile, and I think a lot of uncertainty is built in

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Mack Farley: To the calendar year of the midterm elections, because investors really prefer certainty, and with a lot of uncertainty heading into the fall, historically, that's led to a slightly lower return

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Mack Farley: relative to other calendar years. Now, as we sit here today, the U.S. stock market is actually up about 10%, looking at the S&P for 2026. Now, as we head into the fall.

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Mack Farley: We are anticipating potentially more volatility.

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Mack Farley: As it relates to daily movements in the stock market, Because of that underlying uncertainty.

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Mack Farley: And so, if we look at this chart, the light blue bars are indicating

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Mack Farley: all year's non-midterm elections. The dark navy bars are showing midterm years.

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Mack Farley: And what those bars are representing is volatility or a measure of risk.

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Mack Farley: As it relates to daily movements or swings within the stock market.

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Mack Farley: And so I'll point out, you know, October is a great example as we're leading into the election period in early November.

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Mack Farley: on average.

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Mack Farley: the daily movements or swings, those could be up or down, have been about 50% to 100% larger than normal non-election time periods. So this isn't necessarily meant…

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Mack Farley: To indicate a downturn, as that volatility can be positive or negative.

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Mack Farley: But it's likely to be a lot more rocky as we head into the fall, and investors and the market is trying to predict and trying to gather some certainty around how the election will play out, which ultimately impacts

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Mack Farley: You know, everything from tax policy to government spending.

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Mack Farley: to tariffs and trade, healthcare spending, energy policy, immigration, and labor law, so there's a lot of what-ifs that are being baked into that uncertainty and heightened volatility as we head into November.

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Mack Farley: I think one of the best analogies that I've heard for volatility is a little bit like turbulence, where, you know, when flying a plane, turbulence is very normal, and it's actually never

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Mack Farley: caused a plane crash in the U.S, but it does create more uncertainty and a bit of uneasiness, you know, as it, as a normal measure within our finances and within our daily lives.

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Mack Farley: And so another way to look at

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Mack Farley: the midterm election years as it relates to the stock market is this chart since 1931, where the light blue line is showing midterm year

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Mack Farley: stock market performance, which, generally speaking, from January through election time, has actually been flat, if not slightly negative.

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Mack Farley: with a little bit of a pickup in November and December, post-election time.

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Mack Farley: The top line, the darker navy, shows all other years in the stock market. So what you can really see is, as we head into that

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Mack Farley: Election timeframe. Historically, there's been very little success in the stock market, roughly flat performance on average.

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Mack Farley: However, once the market tends to gather some certainty around election results, then there tends to be a positive performance, at least historically since 1931.

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Mack Farley: Relative to the period leading up.

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Mack Farley: And I think the main…

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Mack Farley: piece I would think about there is, you know, let's say you're running a business, or you're a Fortune 500 company.

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Mack Farley: A lot of times, what you're thinking about is tax policy, or environmental regulations, or energy, and a lot of the inputs into business growth

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Mack Farley: And a lot of times, that can be stalled, or business owners are waiting to see what policies might be in place.

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Mack Farley: Before enacting and initiating growth strategies based on the political environment.

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Mack Farley: And, you know, as we think about that.

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Mack Farley: I'll say, you know, historically, it hasn't really mattered

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Mack Farley: Which policies are in place for the broader market?

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Mack Farley: What business owners and the market is looking for is more of the rules around the playing field within the overall market to gather confidence for business owners to have a better set of

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Mack Farley: Vision within the playing rules to employ business growth strategies or different tax strategies, going forward.

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Mack Farley: And so, you know, as we look at

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Mack Farley: the year following, the 12 months following the midterm elections, you can see, historically, there's been some pretty favorable results in the stock market, but I think our favorite term

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Mack Farley: Is actually time in the market is much better than timing the market.

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Mack Farley: And my favorite example of that is actually my mentor getting into the wealth management business.

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Mack Farley: Had a feeling before 2008 that the banking

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Mack Farley: Financial crisis was right around the corner, and he successfully exited the stock market before 2008.

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Mack Farley: However, because he waited to get back into the market until many years later.

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Mack Farley: He actually lost out on value because he was sitting in cash from 2008 all the way until 2012, when the market had already recovered and actually rebounded

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Mack Farley: Well past that initial, you know, 54% pullback in 2008 and 2009.

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Mack Farley: And I think today, even if you had invested in the stock market.

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Mack Farley: Prior to 2008, and had held your investments through today, you'd still have, you know, an average annual return of roughly 8-10% per year, despite that initial 50% pullback.

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Mack Farley: Now, I think I forgot at the beginning of the call, we are open to questions here in the question box. Please don't use the chat function. I will try to get to as many questions as I can.

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Mack Farley: you know, after the presentation, so if you do have any questions, put them in the Q&A, and I'll be sure to try to answer as many of those questions as I can.

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Mack Farley: after the presentation.

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Mack Farley: And so, if we zoom out even further, looking at politics in the stock market.

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Mack Farley: When I show this chart.

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Mack Farley: There's a lot of initial thoughts and gut reactions around which presidential party, has had better stock market returns dating all the way back to 1933.

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Mack Farley: And if we look at this a little bit closer, the blue shaded regions are Democratic presidents, the red shaded regions are Republican presidents.

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Mack Farley: And you'll notice pretty quickly, it hasn't really mattered a whole lot, one way or the other, which presidential party is in office, from a stock market performance, where that

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Mack Farley: $1,000 initial investment back in 1933 is somewhere in the $200,000 range, if we zoom all the way forward, almost 100 years later, in 2026.

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Mack Farley: And so I think if we look even closer at the same chart, but also document it with these periods of uncertainty, right now we're dealing with the Iran war and crisis. If we back all the way up to 1927,

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Mack Farley: You can see all of the different political…

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Mack Farley: Or world events that have created uncertainty and reasons not to invest In those different time frames.

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Mack Farley: dating all the way back to the… to Black Friday, the Great Depression, World War II, the Cold War, Korean War, the Suez Canal.

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Mack Farley: Cuban Missile Crisis, and I'll zoom forward memory.

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Mack Farley: You know, even dating back just to COVID, which feels…

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Mack Farley: Feels like a couple years ago, 6 years ago now.

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Mack Farley: right when the COVID crisis hit at the beginning of 2020, the stock market fell almost 30% within a few weeks, and rebounded within a few months back to the original stock market levels.

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Mack Farley: 2022, which is not on the chart,

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Mack Farley: from an interest rate and inflationary perspective was a really dramatic year, and a really impactful year, where we had interest rates go from 0%, the Fed hiked all the way to 5%,

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Mack Farley: trying to fight a lot of the COVID-era inflationary impacts. You probably see it at the gas pump, at the grocery store, rents are up, housing prices are up.

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Mack Farley: Causing a lot of, inflationary impacts on our month-to-month and day-to-day budgets.

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Mack Farley: And through that time frame in 2022, the stock market did fall about 20%.

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Mack Farley: And really, since the end of 2022, we've had a really strong 3.5 year rally in the stock market, despite a lot of the volatility.

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Mack Farley: Even just a year and a few months ago, the Trump administration came out with the initial tariff.

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Mack Farley: Plan across the country and across the world.

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Mack Farley: We saw a quick market drop of 20%, slowly to rebound into the summer. And once again this year.

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Mack Farley: with the Iran war and conflict, we saw that 9% market drop in February into a rally, the last few months, both domestically and from an overseas market perspective. So I think big picture, as we look at

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Mack Farley: These different political parties in office.

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Mack Farley: Paired with different world events, economic events, there's always some sort of, market uncertainty or world uncertainty, but one of my favorite quotes is, you know, as we look at history.

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Mack Farley: History tends not to repeat itself, but it often rhymes as we look at these different periods of indecision and…

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Mack Farley: Uncertainties as it relates to the market.

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Mack Farley: Now, one of my favorite breakdowns of this volatility is shown here.

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Mack Farley: As we look at each…

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Mack Farley: Bar chart, or each bar graph.

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Mack Farley: Since 1980, the navy blue line represents the annual return in the stock market.

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Mack Farley: The little red dot below it shows the biggest drop in the stock market within each calendar year.

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Mack Farley: So I'll pick on… 1980, where the stock market was up 33% that year.

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Mack Farley: But within that calendar year, we had a stock market drop of 17%,

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Mack Farley: And so it really illustrates that volatility, and despite the year being very positive.

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Mack Farley: We have… we do see this… these market drops, and on average, each year in the stock market, we tend to see about a 14% market pullback.

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Mack Farley: Which is much higher than I think a lot of people anticipate.

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Mack Farley: Illustrating that volatility is very normal, although can be very uneasing as you're checking your, you know, retirement plan balances or investment account balances.

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Mack Farley: But I think, really, the emphasis here is that over time, this volatility has persisted, but on average, we see

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Mack Farley: Calendar year returns in that 10-11% range over the very long term.

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Mack Farley: time horizon.

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Mack Farley: And so I'll jump to the next page here, where

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Mack Farley: You know, another way to look at

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Mack Farley: Time in the market is illustrating our goal is to capture the best return days, within the stock market to really generate that positive long-term performance.

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Mack Farley: And so, if we look at… the stock market since 2003,

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Mack Farley: Through 2022, if you had invested $10,000 and kept it in the market over that full timeline.

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Mack Farley: That $10,000 would have turned into $64,844 at the end of 2022.

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Mack Farley: Now, let's say we were to go to cash or pull money out and missed a couple of those really good days. That second bar on the chart shows over that long time frame, 20 years, if we just missed

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Mack Farley: 7 of the 10 best days in the market.

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Mack Farley: That $64,000 value would be cut in over half, Down to $29,708.

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Mack Farley: The second bar there is if we missed the best 20 days that fell to 17,000.

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Mack Farley: 30 days, 11,000, and if we miss the best 60 days, or 2 months.

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Mack Farley: Of trading days out of that full 20 years.

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Mack Farley: That initial $10,000 would be cut in more than half.

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Mack Farley: to 42.05, just showing that if we're not in the market and not capturing the return on those really strong performance days.

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Mack Farley: It really hurts our long-term return, and ultimately our long-term financial plan and picture.

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Mack Farley: And so at the bottom, I think in… in fairly recent memory, number 3 and 4

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Mack Farley: right at the start of COVID were actually a couple of the best market days in the last 20 years. You wouldn't think in mid-March of 2020, when the economy was shut down.

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Mack Farley: That we would see a positive 9.4 and positive 9.3

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Mack Farley: Return days, all within a week and a half of each other.

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Mack Farley: Just illustrating, you know, a lot of times when we see bad performance or a poor return day in the market, those are followed by really positive returns, you know, coming right after those large uncertainty events.

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Mack Farley: In the stock market.

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Mack Farley: And so, if we pair this with how we're investing and how we're allocating towards our short, medium, and long-term goals.

:23:49.060 - 00:23:57.610
Mack Farley: What we like to think about is really the risk and return, or our risk appetite towards these different

:23:57.760 - 00:24:08.870
Mack Farley: individual goals. And so, a lot of times what we're looking at is if we have a short-term goal, say in the next 1 to 2 years.

:24:08.980 - 00:24:13.009
Mack Farley: We're trying to keep that as conservative as possible.

:24:13.390 - 00:24:23.379
Mack Farley: while still generating a better return, maybe it's a money market, maybe it's a CD or short-term bonds, in order to accomplish that goal, because if…

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Mack Farley: rewinded back to the stock market performance. In any given year.

:24:30.600 - 00:24:47.250
Mack Farley: the stock market is positive about 77% of the time, and it can be negative about 23% of the time. So if we do truly have a short-term goal or emergency fund that we're trying to build.

:24:47.480 - 00:25:01.829
Mack Farley: keeping that as conservative as possible makes a lot of sense, so we're not subject to inopportune market timing or that volatility that I mentioned if we're having to sell or exit the market.

:25:02.320 - 00:25:08.270
Mack Farley: Now, if we have a 3-plus, 4-plus year time horizon.

:25:08.400 - 00:25:14.050
Mack Farley: then I think it makes sense to look at or consider Adding in

:25:14.200 - 00:25:17.930
Mack Farley: Additional investments that can achieve longer-term

:25:18.120 - 00:25:23.640
Mack Farley: Positive returns, and hopefully outpace inflation over time.

:25:24.320 - 00:25:34.009
Mack Farley: And that could be bonds or stocks or other investments to achieve those long-term results, as long as we have that time horizon

:25:34.390 - 00:25:37.369
Mack Farley: our side. And so on the chart here.

:25:37.700 - 00:25:45.220
Mack Farley: You can see on the y-axis, we have the potential return increasing, with, at the bottom.

:25:45.350 - 00:25:48.589
Mack Farley: Risk levels increasing alongside of it.

:25:48.690 - 00:25:56.829
Mack Farley: And so, as you're looking at your financial plan and in your different accounts, a lot of these

:25:57.060 - 00:26:03.700
Mack Farley: Might have different objectives, or different risk levels, depending on what makes the most sense for you.

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Mack Farley: For example, a retirement account, let's say we're 10 plus years from retirement.

:26:09.710 - 00:26:27.420
Mack Farley: We might be able to afford to take a little bit more risk there, knowing that we have a much longer time horizon on our side to capture some of that return and withstand some of the short-term volatility or swings.

:26:27.480 - 00:26:30.209
Mack Farley: Meanwhile, our emergency fund

:26:30.300 - 00:26:43.200
Mack Farley: You know, for the next 6 months of expenses, as an example, is likely down here on the left, in that lower risk, lower return profile, mapping that out.

:26:48.040 - 00:27:04.379
Mack Farley: And so, as an example, a conservative portfolio, which generally speaking is for, you know, lower risk tolerances or a shorter-term time horizon, might look something like this pie chart, where

:27:04.520 - 00:27:17.760
Mack Farley: Roughly half of it is in cash or alternatives, 25% in bonds, 25% in stocks. And as we work up that risk scale.

:27:18.880 - 00:27:23.609
Mack Farley: A moderate portfolio might be more in the 50-50 range.

:27:23.710 - 00:27:30.730
Mack Farley: Where, you know, roughly 10% is in cash and alternatives, 40%…

:27:30.880 - 00:27:38.090
Mack Farley: Is in bonds, and 50% is in longer-term stock market allocations.

:27:38.250 - 00:27:49.300
Mack Farley: Moving up further into an aggressive allocation, that's where we're taking more stock market exposure, trying to achieve that longer-term

:27:49.440 - 00:27:58.539
Mack Farley: Maximum performance while, you know, undertaking a little bit more risk, with our investment strategy.

:27:59.790 - 00:28:06.100
Mack Farley: And so, if I had to, you know, summarize today's presentation, I think…

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Mack Farley: Elections do create a lot of uncertainty.

:28:09.920 - 00:28:20.410
Mack Farley: But uncertainty has always been a big part of investing. Over the years, you know, we've navigated elections, wars, recessions.

:28:20.790 - 00:28:33.629
Mack Farley: inflationary environments very recently, market corrections, pandemics, and countless other events that have felt overwhelming at the time. And as we look back.

:28:33.980 - 00:28:43.560
Mack Farley: you know, have accumulated, and it might seem a little more certain in hindsight, but I think the lesson here is that

:28:43.860 - 00:28:49.460
Mack Farley: You know, politics absolutely matter in our daily lives, and from a…

:28:49.690 - 00:28:52.840
Mack Farley: A value and global perspective.

:28:53.210 - 00:29:09.100
Mack Farley: But from an investing strategy, really a disciplined, long-term mentality has historically mattered a lot more than trying to predict a certain political outcome.

:29:09.100 - 00:29:13.360
Mack Farley: or what happens with seats in the House or the Senate.

:29:13.510 - 00:29:18.290
Mack Farley: And I think the future will continue to always be uncertain.

:29:18.320 - 00:29:34.919
Mack Farley: But in many ways, that's a part of the investing process in a, you know, kind of the price of admission to some extent. So I think the good news is that we've faced a lot of these uncertain timeframes before.

:29:34.920 - 00:29:46.519
Mack Farley: And, you know, staying consistent and disciplined has been a much more reliable strategy than reacting to short-term news or headlines.

:29:46.640 - 00:29:56.039
Mack Farley: As it relates to our, you know, financial plan, our portfolios, and our budgeting and savings process.

:29:58.180 - 00:29:59.789
Mack Farley: And so with that.

:30:01.360 - 00:30:08.390
Mack Farley: Amber, I'll turn it to you, otherwise I can start trying to tackle some of these questions, and if you do have questions.

:30:09.010 - 00:30:16.719
Mack Farley: Feel free to throw them in the question and answer box, and I'll try to get to a couple of them here with our remaining time.

:30:20.200 - 00:30:23.950
Amber Posthauer: Yeah, it looks like we have maybe two questions in the Q&A if you want to take a peek.

:30:25.510 - 00:30:31.819
Mack Farley: Perfect. So, the first question is, where is the best place to start with investing?

:30:32.110 - 00:30:47.160
Mack Farley: And I think there's a lot of really good providers out there today, and with technology and developments, you know, investing today is a lot easier than it was even just 5 or 6 years ago.

:30:47.290 - 00:31:06.289
Mack Farley: And so, whether it's, you know, any of the big platforms, Fidelity, Schwab, you know, Robinhood, I think starting with the behavioral aspect is the most important piece, whether it's saving on a monthly basis or annual basis for

:31:06.410 - 00:31:11.580
Mack Farley: Retirement, or some of your short, medium, and long-term goals.

:31:11.790 - 00:31:16.240
Mack Farley: I would encourage you to really do a little bit of

:31:16.350 - 00:31:23.190
Mack Farley: research and education. I tend to prefer lower cost,

:31:23.750 - 00:31:41.540
Mack Farley: you know, ETFs or mutual funds as long-term investments. I will say it's very easy to turn the stock market, to some extent, into the casino if you're, you know, betting on different individual stocks, options, or…

:31:41.580 - 00:31:55.549
Mack Farley: you know, some of the other markets out there today. And so I think building that initial foundation with a diversified, you know, ETF or mutual fund portfolio is a great place to start.

:31:55.600 - 00:32:06.809
Mack Farley: And then, over time, just continuing to analyze, you know, kind of your risk preferences, but also your cash flows is really important.

:32:06.910 - 00:32:10.380
Mack Farley: Because, you know, as we…

:32:10.680 - 00:32:26.639
Mack Farley: look at the market. Our main goal is to always have flexibility, and hopefully have the flexibility to grow our portfolios and not have to sell at an inopportune time.

:32:26.940 - 00:32:41.160
Mack Farley: like we had in, you know, 2022, or during the COVID, downturn in the stock market, just to build that in really as a long-term investment for those future goals that you have.

:32:46.620 - 00:32:50.640
Mack Farley: Okay, it looks like… We have another one.

:32:51.480 - 00:32:59.960
Mack Farley: Regarding digital credit instruments tied to Bitcoin through a Fidelity article. Any thoughts there?

:33:00.350 - 00:33:09.310
Mack Farley: So this has been a… certainly a newer industry, and a newer… Platform. I will say…

:33:09.470 - 00:33:13.880
Mack Farley: You know, the digital credit instruments, are…

:33:14.170 - 00:33:25.439
Mack Farley: much more risky than it may seem as it relates to money markets or, you know, even just conservative bonds or treasuries. And so.

:33:25.560 - 00:33:29.590
Mack Farley: In the right circumstance, I think they could be useful.

:33:29.760 - 00:33:43.060
Mack Farley: Now, a lot of those credit instruments are tied to the underlying holdings, whether that's Bitcoin or other cryptocurrencies, which offer an attractive yield, but I think

:33:43.840 - 00:33:50.949
Mack Farley: Without really diving in further, those come with a tremendous amount of risk, where if

:33:51.070 - 00:33:57.260
Mack Farley: the underlying Bitcoin holdings or cryptocurrencies were to struggle, you might be at

:33:57.280 - 00:34:09.959
Mack Farley: at risk of loss of principle or your full investment, depending on how the underlying note and instrument is structured. So I think they could be a good option.

:34:09.960 - 00:34:23.220
Mack Farley: However, generally, we've tried to stay away from those… those vehicles because the risk is inherently much more than it might seem if you see a high or competitive interest rate.

:34:30.460 - 00:34:33.079
Mack Farley: Okay, another question here…

:34:33.750 - 00:34:49.660
Mack Farley: I'm a bit confused on how costs work when you're invested in the stock market and your investment drops. I know when we gain, we pay taxes, but what happens when investments dramatically drop? Is there a percentage owed when that happens?

:34:50.020 - 00:34:52.200
Mack Farley: So this is a great question, and it…

:34:52.570 - 00:34:57.840
Mack Farley: Really pairs into some of the tax planning

:34:58.280 - 00:35:13.230
Mack Farley: you know, that we can do as it relates to your portfolio. So, in a retirement account, retirement accounts are fully tax-deferred, so as you're buying or selling different investments.

:35:13.380 - 00:35:14.450
Mack Farley: those…

:35:14.680 - 00:35:24.430
Mack Farley: taxable gains are continued to be deferred within your account. So if you have a traditional 401K or traditional IRA,

:35:24.580 - 00:35:34.760
Mack Farley: all of those deposits go in, after… or, I'm sorry, pre-tax, so you get a tax deduction in the year that you contribute.

:35:35.030 - 00:35:42.380
Mack Farley: Those traditional accounts grow tax-deferred, and then in retirement, as you pull them out.

:35:42.500 - 00:35:49.719
Mack Farley: The distributions are taxed at ordinary income rates, so regardless of

:35:49.970 - 00:36:01.869
Mack Farley: any of your transactions, buys, or sells in those retirement accounts. There's no taxes until you actually pull out money from the account.

:36:02.280 - 00:36:08.489
Mack Farley: Now, within a traditional individual account, or a brokerage account that's not

:36:08.930 - 00:36:13.600
Mack Farley: Part of a retirement plan or personal IRA.

:36:14.130 - 00:36:20.009
Mack Farley: How the taxes work is, let's say we buy Apple at $100,

:36:20.360 - 00:36:25.450
Mack Farley: If Apple grows to $120, when…

:36:25.710 - 00:36:28.279
Mack Farley: If we were to sell Apple.

:36:28.720 - 00:36:34.709
Mack Farley: The taxable gain there would be the $20 appreciation in the stock.

:36:34.960 - 00:36:38.939
Mack Farley: And so… When those positions are sold.

:36:39.710 - 00:36:44.859
Mack Farley: There's either a short-term capital gain or a long-term capital gain.

:36:45.210 - 00:36:46.940
Mack Farley: that specific position.

:36:47.230 - 00:37:00.760
Mack Farley: Meaning that $20 would be subject to the capital gains taxes. Now, on the flip side, more to your question, if we were to buy Apple for $100,

:37:01.170 - 00:37:05.090
Mack Farley: And it falls to $80.

:37:05.510 - 00:37:12.740
Mack Farley: And we were to sell that at $80, there'd be a $20 capital loss, so that would be…

:37:12.970 - 00:37:17.229
Mack Farley: You know, there wouldn't be a capital gain tax event.

:37:17.350 - 00:37:25.900
Mack Farley: And that loss would be able to be used to offset other capital gains in the future. So there's actually a tax benefit

:37:26.080 - 00:37:28.980
Mack Farley: Even though we lost money on the investment.

:37:29.140 - 00:37:40.650
Mack Farley: To selling, called tax loss harvesting, to selling that investment and harvesting the loss to use to offset future capital gains.

:37:43.490 - 00:37:51.389
Mack Farley: So there's not… I guess to answer the second question there, there's not a percentage owed, you know, from a…

:37:51.560 - 00:38:01.020
Mack Farley: Investment fee, or… or taxes when you lose money on investment. But it is important to monitor that

:38:01.290 - 00:38:04.320
Mack Farley: Go forward, because you can use those

:38:04.460 - 00:38:08.029
Mack Farley: To potentially offset other capital gains in the future.

:38:23.000 - 00:38:28.640
Mack Farley: Okay, Amber, I think that's actually all the questions for today. That's a quiet group.

:38:29.600 - 00:38:32.400
Amber Posthauer: Alrighty, well, I'll go ahead and wrap us up.

:38:32.580 - 00:38:36.230
Amber Posthauer: Thank you, Mack for sharing your valuable time and expertise with us today.

:38:36.760 - 00:38:41.569
Amber Posthauer: To reiterate, today's presentation was recorded, and we'll be sharing the recording in the coming days.

:38:41.780 - 00:38:58.149
Amber Posthauer: At the end of this call, a survey will populate in a new window. Please take a brief moment to complete the survey, as it lets us know what topics are important to our listeners, and helps make our education program as current and relevant as possible. That concludes our webinar for today. Thank you, everyone, for joining us, and have a great day.