This year has been a doozy — to say the least — with unexpected events left, right and center. Despite being one of the most anticipated events of the year, the U.S. presidential election is shaping up to be unpredictable. All this uncertainty has made for innumerable headlines citing the volatility of the markets. Yet that doesn't mean you should put off planning your financial future until the results are in.
Why Hold On To Your Investments
JPMorgan Asset Management's 2020 Retirement Guide shows that if you missed the top 10 days in the market from 2000-2019, your returns were cut by half. That's the impact of pulling out of the market out of fear of uncertainty.
Yes, this election is polarizing. It is hard to predict the market impact in the short-term. The Washington Post notes the unusualness of this election season citing the pandemic, the recession, rising protests, record numbers of unemployment, social distancing and noteworthy volatility in the stock market.
But whatever happens in November, investing is a long-term strategy with a history of rewarding investors for holding on. The JPMorgan guide noted how $10,000 invested in the S&P 500 would have performed under different scenarios. An investor who missed the best 10 days would have grown their investment to $16,180 with a 2.44% average yearly return. On the other hand, if fully invested, the $10,000 would have grown to $32,421 with an average yearly return of 6.06%. The results were worse the more best days investors missed out on.
The study also shows that six of the 10 best days in the market happened within two weeks of the 10 worst. You have to be in it to win it. An investment strategy takes into account riding out the bad days to profit from the good days.
What You Can Do
When you're invested, you don't have to decide to get back in; but when you sell, you now have to make two decisions. If you do "get out" at the right time, you must then figure out the best time to get back in — potentially leaving you without the benefits of having stayed invested.
Working with your financial advisor to build your plan can help ensure a successful financial future for you and your family. Regardless of the election's results, you will have someone to guide you through it and make sure your investments are optimized as much as possible. No one knows what the election will bring to the markets. But we do know that not being invested and having a financial advisor guiding you can have serious impacts on your long-term financial health.
Don't confuse your political views with your retirement savings. Time, not timing, is the key to investing. Your financial advisor will be able to work with you to build a portfolio that aligns with your goals and time horizon.
If there is one thing that's been made clear by 2020, it is that anything could happen. While it may be tempting to wait it out in anticipation of November 3, you should still take a long-term approach to your goals. Don't put your financial future in the hands of an unpredictable election.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
This article originally appeared on Forbes.
