We have an election around the corner. And so far, we have seen a great deal of uncertainty. We have also seen increased volatility in the market. Some people worry about their finances during an election year, but there are some things that remain true even during these uncertain times.
Here are five truths about your finances no matter who wins the 2020 election.
#1: Markets Have Performed Well Under Both Parties
In the past 75 years, the S&P 500 index achieved almost 11%, and the economy grew by approximately 3%. This was obviously achieved regardless of who was in power, so no political party can lay claim to superior economic or financial performance.
#2: Stay Fully Invested
If you invested $10,000 in 1896, you would have about $7 million today. But if you only invested your money under one political party (either Republican or Democrat), you would never break $1 million. Timing the market for any reason is foolish. You need to stay fully invested, and you should never invest based on your favored party. Markets don’t care about politics, and they don’t care who you like or dislike. They care about earnings and profits, which are fundamentals that drive the market. So, don’t get caught up on which candidate wins.
#3: Predictions Are Usually Wrong
Don’t pay any attention to anyone who predicts “doom and gloom,” because most of them are going to be wrong. In 2016, people thought that Trump was going to lose. And a Nobel Prize-winning economist said the market was going to crash. Negative headlines get attention, which is their goal. But the fundamentals rarely change. Dollar cost averaging and diversification still play a major role on the market, so stay focused on your long-term financial plan.
#4: Be Prepared for More Uncertainty and Volatility
Uncertainty and volatility are going to increase in the months ahead. In fact, we’re already starting to see it. We don’t know what’s going to happen with the election, and we won’t know what to believe. Remember what happened in 2016. You can’t time the market, so the best thing is to stay fully invested.
#5: Don’t Ever Bet Against America
Warren Buffet once said that “no one ever got rich betting against America.” Don’t try to jump in and out. Keep it simple. Invest in great companies, stay diversified, and have a plan that will allow you to focus on profits and your financial goals.
For more advice about how you should invest during these uncertain times, be sure to contact Trevor Shakiba at Shakiba Capital.
