This presidential election cycle has many people anxious, especially investors.
A common question I hear lately is:
“What is going to happen to my investments if (Insert Donald Trump or Hillary Clinton, which ever one causes you more angst) wins the election?”
The inevitable follow up question is:
“Should I move all my money to cash until after the election while I still have a chance?”
These questions often are loaded with emotion, primarily fear.
The first presidential election I really remember was Bush v Clinton. I vividly remember the emotions of those on both sides of the aisle and I remember seeing the devastation in those who supported Bush when he lost to Clinton.
Presidential elections certainly draw out of us, very strong passions and fears. The very sound of the name “Trump” or “Hillary” seems to magnify those emotions. But Investing is a losing proposition if you let your emotions be your guide, especially those, like fear or anxiety, brought on by our two candidates for president.
Investing is a losing proposition if you let your emotions be your guide.
So which, Donald Trump or Hillary Clinton, will be better for your investment portfolio?
I can find people supposedly way smarter that me making the case for each. (Ever wonder how these professional market prognosticators can be so contradictory to each other and still maintain credibility?).
The honest answer is “No one knows”!
What we do know for sure is what has already happened, history can be a good indicator of the future.
Oppenheimer funds recently published “Everything Investors Need to Know – and Should Ignore- About the Upcoming Election”.
One question they explore is:
Does the stock perform better when a Republican or Democrat is president?
Neither Party Can Lay Claim to delivering Better market Performance
The takeaway: Just because your political party loses the election doesn’t mean your portfolio will lose value.
The answer may be obvious at this point (or maybe not, depending on how passionate you are about your party) but:
Faced with the following 3 options of when to be invested in the stock market, which would you choose?
- Fully invested regardless of who is in office.
- Only when Republicans in office.
- Only when Democrats in office.
Does this come as a surprise to you?
I know it’s easier said than done, but be careful not to let your fear of either candidate cause you to make a bad investment decision.
Investing is a long-term proposition
If you have money invested in the stock market, whether in mutual funds, ETFs, or individual stocks and bonds, at the end of the day you’re invested in individual companies that generally will adjust to whoever sits in the white house; and will continue to create investment value for your portfolio.
Investing is a long-term proposition. If you are invested according to your risk tolerance and according to your goals, whoever occupies the white house from 2017-2020, whether Trump or Clinton, will be an afterthought in the big picture.
Investing in the market based on whether or not your candidate, or party of choice, occupies the white house has rarely been a been successful investment strategy.
Feeling Anxious about your investments?
If you’re feeling anxious about your 401k or your IRAs or any other account you invest in because of this election, here are a few questions you should ask yourself (really they are questions your financial advisor should have asked or is asking of you):
- What is the purpose of the money invested?
- When will you need to start spending the money that is invested?
- Are my investments properly diversified across different types of assets?
If you have an investment plan STICK WITH IT!
Resist the temptation to time the market.
If you don’t have an investment plan, well this is as a good a time than ever to create one.
Posted by Erik Garcia on Oct 14 , 2016