The upcoming presidential election has many investors feeling anxious about the impact it may have on their money. A survey conducted by investment company Betterment found that 57% of investors are nervous about the election, with 40% expecting to make changes to their investments based on the outcome. Across different age groups, from Generation Z to baby boomers, the fear of potential financial implications from the election is evident.
While investors may feel compelled to adjust their portfolios based on political outcomes, financial experts advise against making decisions solely for political reasons. Markets tend to react to economic factors rather than political events that politicians have little control over. Instead of betting on one candidate over another, experts suggest maintaining a diversified portfolio and focusing on saving more rather than making investment decisions based on politics.
Despite the uncertainty surrounding the election, financial planner Cathy Curtis reassures investors that the economy continues to perform consistently regardless of which party is in office. The Nasdaq Composite, S&P 500, and Dow Jones Industrial Average have seen record-breaking performance in 2024, reflecting overall market stability. Curtis emphasizes the importance of staying calm and not making rash decisions in response to political anxiety.
According to Dan Egan, vice president of behavioral finance and investing at Betterment, there is a growing trend of investors aligning their political beliefs with their investment decisions. However, historical data shows that presidential elections have had minimal impact on the stock market. Since 1928, the S&P 500 has returned an average of 7.5% in election years, only slightly lower than the average of 8% in non-election years. Egan highlights the importance of maintaining a long-term perspective when it comes to investing, regardless of political outcomes.
Investment Strategies
In response to the election, 29% of investors surveyed by Betterment plan to increase holdings in savings accounts. While having a cash reserve can be a wise move, experts caution against keeping too much money on the sidelines. With current high rates on savings accounts and low-risk investments, it may be tempting to hoard cash, but staying invested in the market is essential for long-term growth. Financial planner Cathy Curtis encourages clients to take advantage of favorable interest rates while maintaining a balanced portfolio.
The upcoming presidential election may be stirring anxiety among investors, but it is crucial to remember that sound investment strategies are not driven by politics. While it is natural to feel concerned about the potential impact of political outcomes, maintaining a diversified portfolio, saving more, and staying invested for the long term are key principles to follow. By focusing on long-term financial goals rather than short-term political events, investors can navigate market volatility with confidence.
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