No matter who wins the presidential election this year, or in future years, the outlook for continued growth and innovation long term remains a positive. There’s no reason to believe that even in a pandemic world that we have today that progress and innovation are simply just going to stop because one candidate or another is elected and 2020 isn’t going to start a new trend in that regard. Financial growth is going to happen for some (or even many) and you want to be in that number when it does. The question is: how? How can you election-proof your finances?
Election-Proof Your Finances?
There is often widespread uncertainty before a presidential election, and that extends to worrying about your finances. To election-proof your finances is to ensure that you will be improving your monetary situation no matter who wins. Now I don’t know your particular situation, and I'm not providing advice, but I can make some general observations as to how it can be achieved.
I am so tempted to strike up the music like in “Fiddler on the Roof” and sing “Innovation” (instead of “Tradition”), but I will spare you that tune and just tell you this:
With the amazing world we live in today, where our watches are miniature computers and our smartphones are more powerful than the computers that took up entire rooms just a few decades ago, it’s easy to imagine that our society may have plateaued. How can it get any better than this? Well, I’m here to tell you it can…and will.
You Don’t Have to Be Able to Figure Out the Tech, Because Someone Else Will Do That for You!
Although we may not be able to conceptualize exactly what innovations we’ll see in coming years, the Law of Accelerating Returns says they are coming, and they are coming fast. Innovation is actually accelerating, not slowing down. Going by this Law of Accelerating Innovation, the 21st century could achieve 1,000 times the progress of the 20th century.
Here’s a fact: Our minds think linearly instead of exponentially. It’s hard for us to understand the drastic rate of growth and innovation we’ll continue to see moving forward in the same way it’s difficult to conceptualize the return of money over a long period of time.
The good news is we don’t have to fully understand this concept to take advantage of it.
Investing in Your Future
Your finances today lead to a path for financial growth for tomorrow. Investing in the future of accelerating innovation and growth has paid dividends in the past (no pun intended) and will continue to do so in the future.
Do the Numbers Lie?
Try these numbers on for size for just a minute.
In the period from 1924 to 2016, the average gain in the Dow Jones Industrial Average (DJIA) over the 90 trading days (November to March) following a presidential election was about 8.5%, according to research. That is almost 5% higher for the Dow than in non-election years.
After the elections, the Standard & Poor’s 500 Index (S&P 500) has posted gains for almost every 200 trading day period following these elections since 1942. Stocks have seen significant gains, on an average of 18% in those 200 days. Goldman Sachs has found that the S&P 500 has gained an average of 18% for the 12 months following elections since 1950.
Since 1942, when a first-term president was a Democrat, the S&P 500 has gained an average of 21% for the year. Is that enough of a historical trend for you?
So It’s a Guarantee, Right?
The short answer is not exactly. The market has fallen only one time after an election and that was in 2002, but only for the 90 trading day period (it was up 15% in the 12 month period after it). So nothing is guaranteed but the percentages are on your side.
Many people have attributed its effect to the legislative gridlock that is seen from the competing political parties. What the pundits view as gridlock, the stock market views as a certainty of the political landscape that won’t change very much. The markets love stability and hate uncertainty.
This is especially true when the there is a split legislature which makes it difficult for the politicians to vote through any surprise bills that could rock the stock market and alter historical trends.
What Should You Do?
In a world where earning a return on your money is pretty challenging, what can you do to earn as much as you can at reduced risk and still stay ahead of the curve of inflation? That is the question we ask ourselves all the time, isn’t it? If you are loaded with money, your ability to take a risk is greater, but most of us aren’t in that position.
Despite the fact that I am not a big investor myself in the market, I can easily make a case for doing so in 2020. For one, earning a return on any safe investments like saving accounts and IRA CD’s or money market accounts is impossible right now. I have a large IRA CD currently earning 0.60% and that is about one third of what it was earning just last month. The Fed slashing interest rates has helped you if you took out a mortgage recently or refinanced one, but it’s killing the amount you can earn on of your money. That isn’t going to change in the near term. So what is left but to invest at least with some of your money?
Like anything else we do, taking a risk can be just that: risky.
If there is one area that seems like it going to be a winner, it’s somewhere in the technology sector. That’s where the 21st century is heading and geometrically speeding towards, it does seem. Does a day go by when you don’t hear about some sort of innovative item or items that will be life-changing in just a few years?
Get some serious advice from a pro when you do any investing and even that can be done on the cheap or even free with some investment websites.
Why do I say only a part of your money should be invested? Risk tolerance for some is ok, for others not at all. If yours is in the ok bracket, then investing may make sense. The history and the numbers back that up and with the interest rates right now even more so.
To election-proof your finances, you could try investing in real estate (after all it is finite and in demand) or use your own money and chance some kind of business venture. You could, but do you want to work harder?
Investing seems like a way to earn more and grow your money and do little work yourself, other than use what you have now to get started.
Have you thought about investing to election-proof your finances? If not, why not? Are you afraid of taking a risk? Aren’t you taking one if you don’t invest?