Investing During an Election Year [video]
transcript
The month of October in a US Presidential election year is the month of peak uncertainty. If you're feeling that way right now, that's completely normal. But our emotions should not dictate our investment strategy. Let me go through what I'm telling my clients right now with some charts to back it up.
Stay invested.
Presidential election years actually have higher than average returns historically, but money market inflows also tend to be significantly higher. What that means is that many people are missing out on those better than average returns because they're sitting on the sidelines waiting to see what happens.
Who wins the presidential election alone does not dictate what the stock market does.
This has been sliced and diced, and there's no proven correlation. There's a myth that with certain parties the stock market will perform better, but again, that's just not been proven. The President of course matters, but how it translates to the stock market is much more complex. There's the composition of Congress, tax policy, spending, regulations - all of this is complicated and it takes time for things to filter through the system. So with all of that in mind, picking on Election Day and changing your investment strategy with that one day in mind just doesn't make sense.
Making different sector bets or sector plays based on who wins the election likely will also not serve you well.
It may come as no surprise what a Presidential hopeful says they will do and what they actually are able to accomplish are not the same thing. Most people would have argued that Energy would have done well under Trump and Clean Energy under Biden, but the exact opposite happened. And that was just one example. There were other examples where what happened was different than what the pundits were predicting.
Focus on what you can control.
The things that I'm talking to clients about are things that we can do now that can help us maximize our returns and set us up to meet our financial goals, regardless of who wins the election. Things such as maximizing our retirement savings and HSA contributions by year-end, staying invested, and being smart about our withdrawal strategy in case the tax laws do change. So consider focusing instead on these things versus Election Day. My name is Linda Rogers, Owner of Planning Within Reach.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.