Next week is a big milestone -- the 2020 presidential election will finally be upon us. After months of anticipation, debates, and uneasiness, Americans will soon know who our country's next president will be.
That said, this year's election is unusual in that we may not have an official result for days, if not weeks, until after November 3, due to the large number of ballots that are being mailed in. Still, there's a chance the stock market could grow even more volatile once Election Day comes and goes, so here are a few investing moves to make now that will help you gear up for that strong possibility.
1. Put some stocks on your watchlist
The stock market has been volatile leading up to the election, but it's not just politics that's causing upheaval. Spiking coronavirus cases and the glaring lack of a second stimulus package have caused stock values to drop in late October. Once the election is over, things could get even worse.
That may seem like a bad thing -- nobody wants to see their portfolio value decline. But actually, there could be a solid opportunity to scoop up quality stocks on the cheap following the election, so a good bet is to compile a list of stocks you're interested in. Those stocks could make the list for a reason, such as:
- Diversifying your portfolio
- Having strong growth potential
- Paying dividends
Of course, you'll also need to keep tabs on your watchlist, but compiling it now is a good start.
2. Harvest some losses
Sometimes, investment losses are inevitable. If you have a losing stock in your portfolio that just doesn't seem to have the potential to recover, you may want to unload it sooner rather than later, because if the stock market crashes, your specific loss could end up being more substantial.
Of course, the good thing about selling a stock at a loss is that you can use it to your advantage when it comes to taxes. Capital losses can be used to offset capital gains, so if you've sold stocks at a profit this year, that'll help shrink your tax burden. Furthermore, if you don't have capital gains to offset, you can use your loss to cancel out up to $3,000 of ordinary income, and then carry your remaining loss into 2021 and use it to your advantage then.
3. Practice the art of not panicking
The past week has been rocky enough for investors, but things could get exponentially worse, so now's the time to remind yourself how not to panic when the stock market crashes. The one thing you must keep in mind is that you don't lose money in stocks unless you sell off investments at a loss, so even if November is unkind in that regard, your best bet is to sit tight and leave your portfolio alone (with the exception of selling stocks that have been notably sluggish and adding new stocks to your investment mix).
If you find yourself growing increasingly nervous by the day following the election, remember that the stock market absolutely tanked back in March but recouped its losses by August. So a post-election downturn won't necessarily last all that long.
We don't know what the results of the 2020 election will be and how they'll impact the stock market, but it's a good idea to prepare for some turbulence. Of course, there's a chance stock values will increase once our next president is announced, but it's better to prepare for the opposite and be pleasantly surprised.