The results of the US presidential election could have a strong impact on fiscal policy, the economy and other issues that could ultimately affect investors’ portfolios. In addition, no matter who is declared the winner, there may be some resistance from some American citizens or the losing political party.
Uncertainty is rising.
This raises a timely question: Should people who have extra money aside and have considered investing it in stocks do so before or after the election?
Unfortunately, no one has a working crystal ball. But if there’s one thing we can learn from the history and success of some of the world’s largest investors, it’s this: There’s little value in trying to determine market time. In fact, trying to do so can be detrimental to long-term investment results.
Stay focused on long distances
The greats in investing have some strong words for the market time – and these strong words strongly oppose it.
“If we think the business is attractive, it would be very foolish for us not to take action on it, because we have been thinking about what the market will do,” said the famous investor Warren Buffett. Berkshire Hathawayshareholders at the annual meeting. “If you’re right about the business, you’ll end up doing well.”
Or take it from Buffett’s partner, Charlie Manger:
In the nature of stock markets from time to time go down. There is no system for avoiding bad markets. You can’t do that unless you try to determine the time for the market, which is a serious dumb thing.
Legendary investor Peter Lynch says similarly, “A lot more money is lost to investors who prepare for adjustments or try to anticipate adjustments than they do in the adjustments themselves.”
The market has repeatedly proved to be much more unpredictable than people would expect.
The stocks have survived wars, depressions, recessions and more
But you may be convinced that this time is different because of the election – because the stakes are higher or the country’s response to the election results may be stormy.
If this is your position, here’s something to keep in mind: Between 1921 and 2019. Dow Jones index increases by an average of 8% per year. At that time, the United States suffered the Great Depression, World War II, a dozen recessions, the dot-com bubble, the September 11 terrorist attacks, and many other challenges.
Stocks may fall during the election or in the weeks after it ends. But history has shown us that although they are unstable in the near future, they are likely to thrive in disasters if kept long enough.
Make a plan and stick to it
What can be taken from all this? If you are thinking about investing today, give more weight to the basics of business – such as stock valuation or the country’s long-term economic potential – than trying to guess where the stock market is heading in the near future.
Also, consider drawing up a predetermined investment plan for your excess money. This plan can be as simple as investing it all today and keeping all the instability over the next 10 years, or splitting your investment into equal installments over a period of time. By determining how you will deposit your money in advance, you can eliminate the emotions and market timing of your decisions.
Do not determine market time based on forecasts of a rise or decrease in shares in the coming weeks or months. It is better to embrace the wisdom of the many successful investors to whom much of their success is attributed. avoidance market chronology.