A Presidential Election is no time to make spontaneous investment decisions. In fact, no time is a good time for spontaneous decisions when your financial future is on the line.
This Presidential election has brought out a lot of emotion in people throughout this country. We have protestors in the streets, images of people crying as the results came in, and interviews on television with people who feel drastic changes are about to occur. Getting caught up in these emotional times could lead one to buy or sell investments without following a decision making process.
The best decisions are made after careful consideration of the possibilities and facts. They are not made on a whim when others around us are influencing our judgement due to their heightened emotional state. Even without the political events of last week, investing is an emotional event due to the fact that it involves money. Anything that involves money has emotional attachments.
We did not buy or sell any investments last week. And we won’t buy or sell any this week.
If you are invested using our passive, periodic rebalancing strategy (a strategy that updates the percentage of investments allocated to stocks, bonds,and others once every year) then we must wait until that time of year to rebalance. The strategy does not call for rebalancing based on news reports of what laws Congress might change. Alternatively, if you use our monthly reallocating strategy, your accounts were adjusted before the election, and won’t be adjusted again until December. There is no emotional component to the strategy. It is 100% systematic and the rules are always followed.
That’s how investment decisions should be made. By following a process that is known to work over the long run. Sticking to the systematic process is the way to achieve the expected results.
We Americans won’t know the true impact of the election until next year when the new President is sworn in and starts working with the Congress to write new laws. Whatever laws are actually changed and the impact the new laws have will not be known until the middle of 2017. Remember it is in your best interest to remain calm and follow a decision making process when managing your money during these emotional times.
For comments or questions, reach out on twitter: @iammrmarshall