On Tuesday, November 8th we’ll finally know who the 45th President of the United States will be. What a campaign rollercoaster it’s been. It’s been so contentious and unpredictable, many investors are wondering what it means for their financial futures. Here are some things to consider as the last 40 days of the campaign unfold.
Markets don’t like uncertainty
The VIX (known as the fear index) has been very low for most of the summer. The average reading for the past few years has been around 16, yet the past three months it’s been closer to 13 and sometimes lower. Think of it as a market heart rate. Without making predictions, it’s hard to imagine how the pulse wouldn’t rise as we get closer to an uncertain decision day. A rise in the VIX is usually paired with a dip in the markets, however temporary.
It may be tempting to take money out of the market ahead of potential election-inspired losses, but that’s a good instinct to resist. Remember that markets recovered from Brexit within just one week – an extremely fast turnaround compared to other historically significant market upsets.
Nasty surprises and a simple antidote
There is a soothing antidote to investing ahead of major unpredictable events. It’s called Dollar Cost Averaging. For example, instead of putting an additional $1,000,000 in the markets in one go, buy in $200,000 installments over the course of five months. Starting today, that gets you fully invested by February. By then, the election results will be old news and the new president will have moved into the Oval Office.
Dollar cost averaging evens out results. You could miss part of a rally, but you’re less likely to take the full brunt of a painful -15% correction. We can help you make your decision on how to space out your buys.
Lemonade from lemons
Investing is the only place when everything goes on sale, everyone runs out of the store. Market dips can be a buying opportunity, especially for investors who have portfolio strategy timelines measured in decades instead of years. Remember to look across the spectrum, from emerging market stocks to small-cap domestic stocks. Also, remember that when you use ETFs (exchange traded funds) you have a powerful opportunity to Tax Loss Harvest (utilizing losses to reduce taxes on gains).
If the election produces a dip, think of it as an overdue gift from Hillary and Donald.
Who wins? Who knows?
Despite the wishful thinking of many Americans, one of the two major party candidates will soon be elected. We don’t know how the results will unfold. And even if we did, we wouldn’t know what it means for the stock market. Cause and effect are never so simple in money and politics. We strongly encourage you to avoid any significant change in investments based on the voting outcome. Watch with interest, but don’t try to guess where markets will go.
Max Osbon – firstname.lastname@example.org
delivered to your inbox
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.