What to do along with your 401 (ok) if Trump or Biden win?
US President Donald Trump and Democratic presidential candidate, as well as former US Vice President Joe Biden, are seen during the final presidential debate. (Photo illustration by Pavlo Conchar / SOPA Images / LightRocket via Getty Images)
SOPA pictures | LightRocket | Getty Images
Tuesday’s presidential elections have been described as the most important in US history. Investors may be wondering, what should I do differently if President Donald Trump stays for four more years versus a presidency of Joe Biden?
For most people: very little.
Typically, you shouldn’t change your portfolio in response to short-term events like elections, experts say.
“If you have a long-term investment outlook for the average investor, your choice shouldn’t affect your overall strategy,” said Nicholas Scheibner, certified financial planner with Baron Financial Group of Fair Lawn, New Jersey.
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That’s because, while the election results will have a profound impact on the world and history, it’s harder to say how it will affect your 401 (k) plan.
The market is unpredictable.
“Conventional wisdom seems to imply that Republicans are more pro-business, which is good for stocks,” said Alex Doll, certified financial planner and president of Anfield Wealth Management in Cleveland.
However, he said the S&P 500’s average annual rate of return since 1933, including inflation, has been between 6% and 7%, regardless of who is responsible.
On whether Trump of Biden wins, he added, “Our allocation to stocks will most likely remain unchanged.”
One thing that is more certain is that people who can stay invested for long periods of time tend to be ahead.
If someone had invested $ 10,000 in the Dow Jones Industrial Average in 1900 but didn’t invest it until a Republican president was in command, they would have around $ 100,000 today, according to a recent analysis by Charles Schwab. They would have roughly $ 430,000 if only they kept the money invested under Democratic presidents.
But what if they left the money in the market regardless of which party was in the White House? You’d have more than $ 4 million today.
“It’s the long wave of economic fundamentals that drives markets beyond any election or party,” said Jurrien Timmer, director of Global Macro, Fidelity Investments.
So, according to Timmer, it’s better to focus on the areas that you can control, e.g. B. to save more or rethink your asset allocation.
Doll agreed, “Our main piece of advice to clients is to take this time to reassess your risk tolerance and budget, and then treat that choice like any other noise.”