Markets

3 Reasons Not to Worry About a Stock Market Crash After the Election

Will the results of the upcoming presidential election send stock values plummeting? We can't predict how stocks will fare this November, but it's fair to assume that there may be some volatility once the results of the presidential election come through. Many investors are worried about this, but they needn't be. Here's why you shouldn't panic about the idea of a stock market crash following the election.

1. You won't lose money if you leave your portfolio alone

The best way to lose money in stocks? Sell when they're down. The results of the election could cause stocks to react unfavorably, but if you pledge to leave your portfolio alone until stocks recover, you won't actually suffer any financial losses.

You can help ensure that you're able to leave your investments untouched, however, by padding your emergency savings in the coming weeks. That way, if you need money, you'll be able to access it in cash instead of being forced to liquidate investments.

A person sitting at a desk holding their face with one hand and a mug in the other.

Image source: Getty Images.

2. A market downturn could open the door to buying opportunities

Falling stock values give you a chance to load up on quality investments when they're less expensive. Rather than looking at a potential market crash as a problem, see it as an opportunity.

Over the next few weeks, make a list of stocks you're interested in. Keep tabs on how they're trading after the election. If there are no specific stocks you're looking at, you could always load up on broad index funds if the market tanks.

3. The pain may be short-lived

Back in March, COVID-19 caused the stock market to plummet. Many investors worried it would take years for their portfolios to recover, but stock values came back up quickly. If that can happen during a pandemic, it can happen following an election.

Just look at what happened during the last presidential election. The S&P 500 sunk over 5% in premarket trading the day after the 2016 election, but by the time the stock market closed for the day, the index was back up over 1%.

Again, it's unknown whether the market will crash post-election or how long such a downturn might last, but it may not be the extended period of pain you're anticipating.

Prepare yourself

There are many uncertainties surrounding the 2020 election. Due to the anticipated influx in mail-in ballots, we may not even know the results until mid-November or beyond.

The best thing you can do for yourself as an investor in uncertain times is to take whatever downturn ensues in stride. Boost your cash reserves now, put some stocks on your watchlist, and keep reminding yourself not to panic-sell if things take a turn for the worse.

Remember, stock values might very well rise after the election, so do your best to keep your cool during these volatile weeks.

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