Vote With Your Ballot, Not Your Life Savings
First, elections matter. The next president will have significant power to shape federal policies that affect spending, taxation, immigration, competition, and trade. These are all things that have an impact on the future profits of the companies that we invest in. Changes in these things will cause stock prices to rise and fall.
However, the decisions made by the next president will be one factor among many other factors that affect stock prices. In reality, the number of factors that affect stock prices is incalculable. History shows us that regardless of which party occupies the White House (or has a majority in Congress), long-term investors have been rewarded for their patience and discipline.
Stocks have rewarded disciplined investors for decades, through both Democratic and Republican presidencies. Source: Dimensional Fund Advisors
It’s vitally important to remember that we are not investing in political parties. We are investing in dynamic, competitive companies that are constantly adapting to changing conditions.
What should investors do about the election cycle? If you have strong feelings about the upcoming election, and many people do, you should get involved politically. Vote, volunteer, and knock on doors for your preferred candidate. Express your strong feelings in whatever way feels right to you, but don’t express your political preferences with your life savings. It’s a bad bet.
A better bet is focusing on the things we can control and putting it all in a long-term plan. There are temporary tax laws that sunset in 2026, so any new administration will likely have an opportunity to shape tax law in ways that will impact investors. This is the type of issue that a thoughtful plan addresses and illustrates the type of impacts we should be focused on.
A well-designed plan keeps us doing all the little things day-to-day that add up to big things. The plan keeps us focused on the things that are most important to us today and in the future. It ensures that we know what to do tomorrow and the next day.
The good news is that the outcome of any election should not heavily influence your investment decisions. Presidents will come and go, but a solid, long-term investment strategy remains steadfast. Focus on your goals and stay disciplined, regardless of the political climate.
