This time it’s different. Sir John Templeton once said that those might be the four most expensive words in the English language. And here we are again – just like it happened in 2012, some friends and clients have asked me if they should move their investments to cash out of fear that an undesirable presidential candidate might win. The short answer… No.
Should you alter your investment strategy before election day?
I have some personal concerns about how the election’s outcome might impact America from a social and environmental standpoint, and I’m struggling to separate my feelings from what I’m actually invested in. But, I remind myself that I’m not invested in Trump, Clinton, or Wall Street. I am invested in innovation, businesses, land, buildings, etc.
Ultimately, while my fears are real, my experience and training reminds me that neither candidate is likely to have a long-term negative consequence on the world economy. If the market sees that the election is tipping towards an undesirable candidate, it will respond quickly. It might drop or it might rise, and if I could predict which one would happen and when, I’d be writing this blog from my private yacht.
To successfully speculate on an economic event and the impact it would have on my investments, I’d have quite a challenge in front of me:
- I’d have to sell before Wall Street decides who is going to win.
- The markets have to actually drop to validate my decision as the right one (i.e., I have to be right).
- I’d have to buy back into the market at exactly the right moment (before the market starts to recover).
With my investments, I fully intend to stay the course regardless of the election’s outcome.
Are you diversified?
The outcome of the election may produce short-term “winners” and “losers” as far as specific industries and companies – all the more reason to make sure you’re in a globally diversified portfolio. (If you only own a handful of stocks, your risk of large losses is huge with or without a looming election.)
Yes, a financial advisor is once again suggesting you do what you’ve heard over and over again – stay the course. Yawn. The risk of reacting to any type of possible world economic situation that you cannot control is far greater than the risk of sticking with your plan and staying focused on the things that you can control. Of course, I’m not saying you can’t become an expat in Ecuador if you don’t like the election’s result, just make sure to read my blog about living abroad first.