9/15/16

This year’s presidential race will surely be one for the record books. Already, the media coverage, the drama and the voter turnout during the primaries are all breaking records. One connection that investors are trying to make is how this election will affect their money. Many people are trying to predict what will happen to their investments depending on which candidate wins. But is this a senseless process, or is there real truth in worrying about who will win the election and what it will do to your investments?

Here are a few points that might help you determine just how much of an impact the outcome of this Presidential election might affect your portfolio, as well as what you can do about it.

Predictions Can Fail

No one can really predict just how one event, such as a Presidential election, will impact another event, like the financial markets. There are numerous factors that come into play that can affect the outcome of something as influential as the state of the economy or its impact on your financial portfolio. Even if there is a Nostradamus among us, it is difficult to know just who to believe with so many experts weighing in with their own opinions.

One major point to consider is that many predictions made by financial advisors and other market experts end up being wrong. Just look at the recent Brexit drama, where many of the world’s leading financial market experts agreed that there would be major stock market crashes around the world for months. While it’s fair to say they were right for about three days, the reality is that almost all of the global markets have recovered since then and some have even recorded new highs, like the markets in the U.S.

Go back even further in time to the Y2K scare. Many leading experts were on edge thinking that markets would fail to open, businesses would be shuttered and the world would descend back to the dark ages because of a simple computer software glitch. Of course, nothing happened that time either.

The point is that expert predictions are often wrong, then everyone forgets about it until the same experts move on to another topic of interest or their next prediction. If the experts can’t get it right, then why should you try to make a prediction about what will happen either?

Instead, Come Up with a Strategy for Good Times or Bad

Instead of trying to gamble with your money, regularly review your long-term plan and consider how you will adapt your portfolio to different outcomes in the market. Why not come up with a general strategy for minimizing short-term market performance? By mapping out your goals, risk tolerance, and time frame you have a plan to protect yourself in any type of market. This way you don’t have to worry about getting predictions right, just follow your plan.

Investing is not about emotion, it’s about following a long-term, strategic plan and reviewing its progress. Most predictions tug at our emotions and can cause us to make poor investment decisions. Isn’t it a better idea to just plan ahead so you know your portfolio can weather any storm? Don’t let the hype of this Presidential election steer you in the wrong direction or diverge from a well-constructed, long-term financial plan.

 

The FMB Advisors Blog

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