What to Do (and Avoid) with Your Money Ahead of the Election

Originally written and published on Business Insider

With a major presidential election looming, it’s impossible not to wonder how the outcome will impact you and your money.

What should you do with your finances ahead of the vote? Do you need to make changes in your investment portfolio before the election?

As a financial planner, here’s what I see as things to do (and what to avoid).

Keep politics out of your portfolio

You have good reason for holding the political views that you do. But when it comes to your investments, keep some distance between politics and your portfolio.

If you zoom out for a broader perspective, the US stock market has grown in value over time. That’s regardless of which party is in the White House or which party controls Congress.

Although it’s tempting to draw definitive connections like “the market does better when X is in power” or “stocks go up when Y happens,” it’s incredibly difficult to single out a specific cause for market movements or events.

Be prepared to ride out short-term market volatility

I would not be surprised if we see increased volatility in the stock market around the election. In fact, I'd expect it. But if you’re a long-term investor, part of your job is to tune that out. It’s noise, rather than the signal. 

This is not to say that elections don’t matter or there’s no difference between the two candidates involved. It does mean that you should (a) expect big swings in either direction in the short-term and (b) keep calm and stay invested!

Beyond Your Hammock’s fractional CIO, Mario Nardone of East Bay Investment Solutions, shared the below chart with us and our clients earlier this year. 

It shows what happens if you jump in and out of the market based on whether or not your preferred party is in the White House...

..and how those returns get crushed by the investor who simply stayed invested the entire time:

On average, market returns have been positive in election years and the subsequent year, regardless of who got elected.

It's more important to focus on the long term for your investments rather than try to guess what’s going to happen in the immediate future.

Guard against scams

Staying the course is the general recommendation for an investment portfolio when you already have a long-term strategy in place. But what about your immediate cash flow?

Be cautious before making donations or agreeing to requests for money from any source. CNN recently found that deceptive campaign fundraising tactics have taken millions from the pockets of elderly Americans, including those with dementia.

While you might feel this might not impact you, feelings (and tensions) run high this close to a major election which can create blind spots or leave people more vulnerable to manipulation than they might normally be in a calmer enviornment.

Here are the general best practices for protecting yourself and your money against fradulent activity that we've shared with our clients lately:

• Freeze your credit; this is simple and easy to do online. Make sure to freeze your credit with all 3 bureaus.
• Maintain unique passwords for every login, especially at financial institutions or any platform that houses sensitive personal info. If this is too much to manage, investing in a password manager like Dashlane is well worth it (we use this in our business and in our household personally).
• Update passwords on a regular basis (again, easier to do with the help of a password manager).
• Implement two-factor authentication across your online accounts (especially your email, your social media, and your financial logins).
• Request fraud alerts from your financial institutions.
• If you already know of a particular incident that impacted you, you can report it to https://www.identitytheft.gov. This will also generate a "recovery plan" with specific steps to take, too.

Some fraud prevention comes down to basics: a combination of awareness (know what common scams are out there and stay alert) and a healthy dose of skepticism. When in doubt, shut down suspicious conversations; don't click that link; call your bank directly to verify a message or email allegedly sent by the institution; and be extremely cautious when wiring money or with any kind of activity around financial accounts and money movement.

4 actions you can take right now

As human beings, most of us have a bias towards action. When we feel strongly about an issue or event, it feels much better to do something rather than sit by and do nothing.

But your money, especially your investment portfolio, likely needs you to “do nothing” ahead of the election. This is especially true if you’re a long-term investor with many years (or decades) between now and when you hope to start drawing from your savings and investments to support your lifestyle.

Still, there are some proactive steps you can take to put yourself in a better financial position now:

1. Confirm you have access to cash reserves. Always maintain an emergency fund or some amount of cash on hand that is easy to access as soon as possible. A high-yield savings account is a great option for this; CDs and vehicles like iBonds are not.
2. Reduce any major spending areas. If there are obvious places in your budget to cut back, try to remove those costs now and direct that money to savings instead. Having a little extra cash flow power can give you peace of mind.
3. If you have excess cash, make those dollars work harder for you. If you have a full emergency fund, cash to use on your short-term goals, and still have extra money in the bank, you’re missing opportunities to earn more. Move excess cash to something like a CD if you want to lock in current rates or your investment account if you’re prioritizing long-term growth. Also make sure you’re tracking to max out qualified retirement accounts and vehicles like HSAs before December 31.
4. Consider ways to reduce your tax bill. One of my favorite strategies for our clients is to donate appreciated shares of stock to charitable organizations and replenish the value of the donated stock with new cash into your account. You need to do this before year-end to benefit on your 2023 tax filing. You may also want to consider tax-loss harvesting to help offset capital gains.

The policies we pursue and set at all levels of government matter, and we should care about them. I strongly believe in proactively working to change what we feel is wrong and supporting what we believe is right.

Making impulsive or emotional money moves ahead of an election, however, does not help anyone - and can harm you personally most of all.

Are you a motivated professional in a high-demand career with a growing family and endless competing priorities to manage?

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