With the presidential election looming, many people are wondering when's the right time to add to their personal stock portfolios. If you've been holding off on buying stocks because you're assuming you're better off doing so after the election, you may want to rethink that plan. Here's why.
Seize the opportunity now
It's true that the results of the election could shift stock values downward, but we can't bank on that happening. What we do know, however, is that major market indexes like the S&P 500 and the Dow Jones Industrial Average are closing out the month of September lower than where they started it. This dip means that you may have a prime opportunity to buy affordable stocks now. If you wait, that opportunity might disappear.
Still, if you're going to invest ahead of the election, it's important to have a strategy. Your first step should be to assess your existing portfolio and ask yourself these questions:
- Is it diverse enough?
- Are there individual stocks in there that are making you nervous and are perhaps ripe for tax-loss harvesting?
- Are you taking on too much risk for comfort?
From there, you can establish a plan that helps you meet your immediate and long-term goals. That could entail:
- Delving into market segments that are currently missing from your portfolio
- Buying up value stocks
- Focusing on growth stocks
- Loading up on dividend stocks
- Playing it somewhat safe by putting your money into index funds, which offer instant diversification
Of course, keep in mind that the election season and stock market volatility tend to go hand in hand. If you buy stocks now, expect their value to fluctuate between now and early November -- but don't panic if your investments initially lose money, or do so after the election. The stock market has a strong history of recovering from downturns both major and minor. If you pledge to leave your portfolio intact when stock values decline, you'll avoid losses.
Will stock values fall after the election?
You may think that the stock market will tank following the election. However, without a crystal ball, it's impossible to know what impact the results will have. If there is a market downturn, you'll have another opportunity to buy stocks at a discount, but don't hold off on investing today because of that potential scenario.
Waiting until after the election to invest is basically akin to timing the market -- a strategy that's long proven itself to be overwhelmingly ineffective. You're better off investing now while stock values are down a bit and sticking to a consistent buying schedule in the coming months. Between the election and the ongoing coronavirus pandemic, the remainder of 2020 is apt to be rocky, so your best bet is to put money into stocks regularly as we ride out the upcoming storm and hope for a better 2021.