What’s An Investor To Do This Election?
During times of political polarization in an election year, even long-term, goal-focused investors can feel stressed. There are so many unknowns about what will happen day-to-day leading up to the election, the stock market can move up-and-down based on sentiment and headlines, and it’s unclear what the next administration might do that could impact your retirement plans.
So, what’s an investor to do?
Although easier said than done, the best thing you can do is:
- Pay less attention to the mainstream media, which is in the business of scaring you!
- Remember stocks are companies that can adapt and are focused on pushing earnings higher, evening in changing and challenging environments.
- Ignore factors you cannot control and focus on the items that you can control, which are:
- How much you spend
- How much you save
- How you’re currently allocated across stocks, bonds, and cash
- When certain events happen (For example: retirement, big purchases, travel, etc.)
Focusing on these items can help you take back control during times when you’re feeling uneasy and susceptible to making emotional decisions about your investments, which can do permanent damage to your financial plan.
Regardless of who wins the election, history suggests that the stock market often continues onward and upward. For reference, please see the exhibit below by Dimensional Fund Advisors LP, which charts the S&P 500 index throughout different administrations in history. (Source: https://www.dimensional.com/us-en/insights/how-much-impact-does-the-president-have-on-stocks). While there is no guarantee that this pattern will repeat itself, we believe it is important to keep this in perspective as we close in on the election.
