Now that the election is behind us, it is safe to say that Trump’s victory was unexpected. Just like the Brexit vote back in June, his victory raised more questions than it answered. It has created an atmosphere of uncertainty and markets typically respond to uncertainty with heighted volatility.
So what does this mean for you as an investor? What is the appropriate response? How can you best position yourself in light of this increased “risk” of the unknown?
Ample evidence informs us that it is unwise to alter a long-term investment strategy in reaction to breaking news, no matter how exciting or grim that news may seem, or how the markets are immediately responding. As we saw with the unexpected outcome of this summer’s Brexit referendum, the biggest surprise may be how resilient markets tend to be, as long as you give them your time and your patience.
As the markets try to make sense of what the election results will mean, the best thing that an investor can do is stick to their plan and focus on what can actually be controlled – things like diversification, saving, and cost and tax minimization.
Consider these words by billionaire businessman Warren Buffett who published these sentiments on March 1, 2013, shortly after the last presidential election cycle:
“America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful). American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a Post-game that is heavily stacked in their favor. … The risks of being out of the game are huge compared to the risks of being in it.”
Presidential terms are four years long. Properly structured investment portfolios are built to last a lifetime. Hopefully, that helps to put these election results into perspective as you consider your next steps.