First things first, who are you voting for? Just kidding, now-a-days the disclosure of that sacred black book confidential information will lead to disownment, loss of friends, or the next civil war, and financially speaking, it doesn’t matter! Or does it? Let me explain.
46% of people plan to adjust their portfolio if their candidate loses the election. Mayday, we have a Notorious B.I.G. problem. Take a look around, Cindy’s voting for Trump, John’s voting for Biden, and Doug still thinks Kayne is running for President, someone has to lose. Don’t let it be you!
So here’s the secret sauce to winning with your investments depending on which candidate wins, and it’s not Franks Red Hot. It’s about to get Notorious B.I.G. Juicy...okay, enough Biggy jokes. Let’s make this quick and painless.
The U.S. Presidents from 1948-2019 and their Stock Market Returns
Who were the Democratic Presidents and how did the stock market do during these years?
The Presidents: Truman, Kennedy, Johnson, Carter, Clinton, and Obama.
The S&P’s Average Annual Return: 10%
Who were the Republican Presidents and how did the stock market do during these years?
The Presidents: Eisenhower, Nixon, Ford, Reagan, Bush, W. Bush, and Trump
The S&P’s Average Annual Return: 7.7%
So, what did we learn? Elect a Democrat! ...not so fast Quick Draw McGraw; listen up.
Say you invested $100,000.00 from 1949-2019 only when a Democrat was in the office, your investments would have grown to $2.9 million dollars. And Bingo was his Name-O.
But, say you invested $100,000.00 from 1949-2019 only when a Republican was in the office, now, your investments would have grown to $717 thousand dollars. Not bad, but similar to your first girlfriend, you could’ve done better.
So again, what did we learn? Elect a Democrat! …not so fast Grease Lightning; peep this.
If you would have had your $100,000.00 invested in the market the ENTIRE TIME from 1948-2019, while both Democrats and Republicans were in office, your investments would have grown to $21.1 milliiiooonnn dollars (Dr. Evil voice with pinky in mouth).
So, what did we learn in today’s modern era School House Rock article? It doesn't matter who’s in office! You need to be investing throughout your entire lifetime, regardless of which political party is in office. Money isn't red or blue, it’s green...isn’t there a Green Party? Nevermind that!
What was that....did someone say encore? Alrighty then Jim Carrey!
So you might ask, if it doesn't matter who gets elected, what should my investment strategy be?
Briefly, without getting into the Wiz Khalifa weeds, I have 3 simple steps: stay invested, stay diversified, and rebalance. Let’s break these trees down.
Stay Invested: Pretty straightforward, you need to stay invested in the stock market for the Forest Gump long run. 1 year? 5 years? 7 years? Personally, I suggest 10 or more Stretch Armstrong long years.
If you look at the stock market on a month-to-month basis, it’s wilder than Wild Cherry’s Play That Funky Music and contains more ups and downs than Dance Dance Revolution. But, if you look at the stock market over ANY 20 year period, it NEVER LOST MONEY! (disclaimer: past performance doesn’t guarantee future results)
Stay Diversified: There are 16 major asset classes and market sectors, but the Who Wants To Be A Millionaire million dollar question is which one/s to invest in and how much to allocate in each sector? Okay, so technically that’s 2 two questions, but who’s counting. Personally, I suggest owning them all.
Example: If you owned all 16 asset classes over the past 10 years, you would have made an average 7% return. But watch this Copperfield magic. If you missed
(didn’t invest in) 3 of the 16 best performing classes, you only would have made 3.3%. Unless you’re Ms. Cleo, you won’t be able to pick the winning markets, so own them all. How much to allocate in each? That depends on your own situation, goals, and circumstances.
Rebalance: I will demonstrate by using an example. Say you own 90% in stocks and 10% in bonds. Over the next year, stocks have their best Tony Hawk comeback yet and increase tremendously. Bonds however, like dating during a pandemic, suck. So gradually over the year, your stocks shoot up to 98% and bonds drop to 2%.
What’s the problem? Like dirty videos and computers, crashes happen, and so do markets. The last thing you want is a market crash when you have 98% in stocks! That’s where rebalancing comes in to save the day like Captain Planet saving the environment from our carbon emissions. Personally, I suggest rebalancing once a year or when you see your portfolio getting out-of-whack. For this example, you would want to sell the 8% stock gain and buy into the 8% bond loss. This puts your portfolio back to 90/10 for the new year start, which is more appealing than crowded gyms.