What Does the Upcoming Election Mean to Your Investments?

For smart investors, the surprising answer may be very little. Here’s why, and what you should do (and not do) as election season heats up.

Investing during an election year comes with a special kind of risk. Your mind is on sharp alert.  The very nature of politics and your nest egg can spark emotions that may drive you to make decisions in the short term that could have a negative impact on your long-term goals. 

Consider taking a step back to “pause” and set aside your emotions and bias, keeping your long-term perspective in mind.  Ponder the three ideas below as we move closer to the  election.     

1. Stop worrying about which party is going to win.

No matter who you believe to be the best fit, investors can create unneeded anxiety if they spend too much energy on the election results — and that can lead to irrational behaviors. In fact, historically speaking, elections have made very little impact over long-term investment returns.  As Capital Group economist Darrell Spence says, “There are many other variables that determine economic growth and market returns and, frankly, presidents have very little influence over them.” 

The graphic below shows that over the years, staying invested and avoiding the temptation to let emotions drive financial decisions has delivered the best overall outcome for investment portfolios.  Keep in mind, past performance results are not indicative of future performance, thus, market consequences exist regardless of your favorite party or candidate to your overall performance and returns in the long run. 

2. Don’t be surprised to see volatility increasing as we near the election: Expect it.

When volatility happens and it is your personal retirement account or your children’s college tuition fund at stake, it may be very difficult to sit and watch.  Taking action may make you feel better during times of crisis, but in actuality sometimes the best advice is to do nothing. 

Most people are not analyzing statistical algorithms and charts to determine what decisions they should make.  In the real world, our emotions influence our decision-making process.  We, as investors, should expect volatility in the markets, as it is a normal characteristic to long-term investing.

The critical takeaway is this: Stay the course.  Expect to see rough patches, headlines and bad news — there will always be a flavor of the day when it comes to “financial noise.”  Behavioral finance research shows that the average investor tends to buy high and sell low as a result of being pulled into the financial noise and making emotionally driven bad decisions.  Capital Group created the graphic below “Cycle of investor emotions,” can you relate?

3. Do not be tempted to time the market during election season.  It’s time in the market, not timing the market! 

Peter Lynch, former fund manager with Fidelity Investments, is arguably one the most successful investors of all time.  Peter is famously quoted as saying “Far more money has been lost by investors trying to anticipate corrections, than lost in the correction themselves.”  Between 1977 and 1990, Lynch’s fund averaged an approximate 29% annual rate of return, which more than doubled the S&P 500 index, making it the best-performing fund in the world during that time.

Given this remarkable track record, you might be shocked to learned that the average investor in the fund actually lost money!  What?  How!  The most obvious answer is that withdrawals from retail investor accounts increase during uncertain times, and as the markets recover most believe that it is a good time to start buying back those shares which were sold.  In essence, average investors are selling low and buying high instead of just staying the course.

JP Morgan’s “Diversification and the average investor” chart below may beg the question of staying the course.  As you can see, the average investor’s rate of return is barely beating inflation…

In closing, expect a sensational election season, along with volatility and the temptation to try to time the markets.  We suggest you meet with your financial adviser to review your asset allocation, investment risks, and to specifically stress test your portfolio against your lifestyle goals and desires. 

We welcome you to visit our website ( to start a conversation. Regardless of your investment strategy, remain grounded with clarity and confidence that this too shall pass.

About the Author

Dennis D. Coughlin, CFP, AIF

Partner, CG Capital

Dennis D. Coughlin, CFP, AIF, co-founded CG Capital with Christopher C. Giambrone in 1999. He has been in practice since 1996 and works with individuals nearing retirement and those whom have already retired. Proud of his humble upbringing, Dennis shares his advice with the same core principles that he was raised with. When not in the office, you will find him with his family enjoying the outdoors.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022


Why Women Need to Take a More Active Role in Their Financial Futures
Women & Money

Why Women Need to Take a More Active Role in Their Financial Futures

It’s a mistake to let someone else make all your decisions or take care of everything for you. You can start taking control of your finances by review…
January 17, 2022
What Assets Should Be Included in Your Trust?
estate planning

What Assets Should Be Included in Your Trust?

A revocable living trust is a great tool to help your assets pass smoothly to your beneficiaries, and it can significantly reduce the headaches of pr…
January 16, 2022
Is the Stock Market Closed on MLK Day?

Is the Stock Market Closed on MLK Day?

Both the stock markets and bond markets will have Monday off as the nation honors civil rights leader Martin Luther King Jr.
January 15, 2022
Public Defender or Private Attorney: Which Should You Use?
personal finance

Public Defender or Private Attorney: Which Should You Use?

Words of advice from two attorneys about one of the most important decisions you might make.
January 15, 2022