The results of the US presidential election could have huge implications for fiscal policy, the economy and other issues that could ultimately affect the investor portfolio. In addition, regardless of who is declared the winner, some US citizens or the losing political party may receive a certain waiver.
This raises a timely question: should people who have a surplus of cash, sitting on the sidelines and considering investing it in stocks, do so before or after the election?
Unfortunately, no one has a working crystal ball. But if there is anything we can learn from the history and success of some of the world’s largest investors, it is this: there is little use in trying to time the market. In fact, trying to do so can hurt long-term investment results.
Stay focused on the highways
Big investors have a few strong words about market terms – and these strong words strongly oppose it.
“If we find a business attractive, it would be very foolish for us not to take action because we were thinking about what the market was going to do,” said a well-known investor, Warren Buffett. Berkshire HathawayRussian shareholders at the annual meeting. “If you’re right about the business, you’ll be fine.”
Or take this from Buffett’s partner, Charlie Munger:
The nature of stock markets from time to time go down. There is no system that avoids bad markets. You can’t do that unless you try to time the market, which is a serious business.
Legendary investor Peter Lynch also says: “Much more money is lost by investors who are preparing for a correction or trying to anticipate a correction than it is lost by the corrections themselves.”
The market has repeatedly proved to be much more unpredictable than people would expect.
Stocks have survived wars, depressions, recessions, and so on
But perhaps you are convinced that this time is different because of the election – because the stakes are higher, or the country’s reaction to the election results may be stormy.
If this is your position, here’s what to consider: between 1921 and 2019 Dow Jones the index increased by an average of 8% annually. During this time, the United States suffered the Great Depression, World War II, dozens of recessions, dot-com bubbles, the September 11 terrorist attacks, and many other intestinal problems.
Stocks may decline during the election or weeks after it ends. But history has shown us that while they may be volatile in the near future, they are likely to thrive through hardship if kept long enough.
Make a plan and stick to it
What can be taken from all this? If you’re thinking about whether to invest today, give more weight to the basics of business – such as valuing stocks or the country’s long-term economic potential – than trying to guess where the stock market is heading in the near future.
In addition, consider drawing up a predetermined investment plan for excess cash. This plan can be as simple as investing it all today and holding all the instability over the next 10 years or splitting your investment in equal parts over a fixed period of time. By deciding how you will distribute your money in advance, you will be able to remove the emotions and market time-out of your decisions.
Do not limit market time based on forecasts of inventory growth or decline in the coming weeks or months. It is better to use the wisdom of many successful investors, to whom much of their success is attributed avoiding market terms in general.