It’s easy to become wrapped up in the U.S. election and worry about your portfolio, but in the long run, this is not necessary.
Pandemic, elections, Thanksgiving even; the world spins on and on regardless. However, it’s easier said than done not to worry about the impact of these things on your finances.
However, you shouldn’t let it affect your portfolio too much!
“Will the election affect my portfolio?“
Presidential elections always feel like a game-changer for the stock market, and even our lives. Every four or eight years, the most powerful leader on the planet is replaced and their own specific ideology is put in place. That’s always going to be scary.
However, it doesn’t mean that you need to change your investment strategy. In the words of The Collaborative Fund partner and former Wall Street Journal columnist Morgan Housel:
“Presidents tend to get too much credit/blame for market returns!”
You can listen to more of Housel’s views on how we shouldn’t base our portfolios on elections in our latest ‘Stock Club’ podcast: ‘The World According to Morgan Housel’.
For the short version though: Making portfolio moves based on election results has always been a risky strategy, and you shouldn’t do it., The simple truth is that, in the long-term, elections have little bearing on stock growth:
- Stock market returns average around 6.5% if an incumbent party maintains hold of the presidency, or if the president is reelected.
- If the party changes, markets average gains of around 5%.
- The first two years of a presidential term are mostly associated with below-average returns
- The second two years tend to outperform, balancing out the first two.
Also, don’t forget the fact that we’re in the midst of a pandemic, which will have far more bearing on the markets than who happens to be sitting in the Oval Office.
“What should I do with my portfolio then?”
The same thing that you should always do: Buy and hold ‘til you’re gray and old! Again, in the words of our friend Morgan Housel:
“Save like a pessimist, invest like an optimist.”
Here at MyWallSt, we have a long-term buy-and-hold strategy, while our CEO and Chief-Investor Emmet Savage has seen his portfolio survive and thrive through 3 recessions and 4 presidents. Presidents and recessions come and go, compounding goes forever on. Just keep investing and try to block out the short-term noise.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.