As we get closer to November, I’m getting more questions about election year volatility and whether or not we should do anything to prepare for that.
It is very reasonable to expect some type of volatility, such as a market pullback that results from people reacting (or should I say, pre-acting) to uncertainty.
Investors working a long-term plan for financial success should never make that mistake.
Whenever pullbacks happen, what we CAN and WILL do is buy more shares with our reinvesting dividends at lower prices- someone's loss will be our gain.
While it is always pointless to guess what might happen in the short-term, there are a few things that seasoned investment advisors like myself can say confidently:
- Making investment changes in anticipation of something that may or may not happen, and in any case should be short-lived, almost always results in underperformance, frustration, and regret. I’ve never had someone say “thanks for letting me do that!”
Timing the market successfully involves two lucky guesses, something the most knowledgeable professionals won’t attempt. Unless you survived a lightning strike and a shark attack on the same day, the odds aren't good.
More importantly, your long-term financial success does not depend on market timing. It depends on time in the market.
- Your lifetime investment strategy factors in ups and downs of all causes. Investment managers identify opportunities that come with a changing landscape and make the most of them for us.
- While volatility may pick up around this time of year, historically stocks have finished positive in election years more often than not, once the dust settles. The reason: the uncertainty is cleared up.
Unguided investors are the ones who sell low, and buy back high, and wonder why they never get ahead. Don’t be tempted to join them.
Folks my age or older may recall that we go through a similar pattern every four years, and as the chart below shows, well run, profitable businesses soldier on.
I never want to appear dismissive of the very real concerns people have about their money. Indeed, what I can do with your success and very best interests in mind is help you…. Do nothing.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Graphic created by Dimensional Investors
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