A 2024 survey by Betterment found that 57% of investors feel anxious or scared about the result of the upcoming presidential election.
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Historically, political anxiety has not served investors well. A 2009 academic study found that investors did fine when their own party was in power — but made poorer decisions fueled by fear when the opposite party took power. They mistakenly moved money out of their investments and hoarded cash.
The wealthy aren’t immune from political biases and fear. But they do put systems in place to manage those biases and anxiety.
The stronger your political opinions, the more you need to manage your emotions so that they don’t manage you and your investment decisions. Consider these tactics by the wealthy to stay in control, so your fears don’t ruin your returns.
Keep Historical Perspective
Partisans tend to think that their party has outperformed the other on economic issues and financial performance.
They may not be correct.
With a one-year lag time to let policies affect financial markets, the S&P 500 “has achieved a median compound annual growth rate of 9.3% during Democratic presidencies and 10.2% during Republican presidencies,” according to The Motley Fool. The difference is fairly minor.
Presidents and their executive orders come and go. The economy chugs on.
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Speak With a Financial Advisor
If you still think the sky will fall on your portfolio if your candidate loses, sit down with a professional.
That could mean simply paying a flat rate for an hour with a financial planner or investment advisor. You can talk through your goals with them, and they can help you come up with a plan for continuing to invest regardless of who sits in the Oval Office.
If you like, you can also hire them to manage your investments for you. The wealthy don’t glue their eyes to their stock portfolios every minute of the day. They put systems in place to keep the gears turning and their net worth growing, which often means having their advisor oversee moving money every month into new investments and rebalancing their existing portfolio.
Automate Your Investments
In today’s world, you don’t have to pay a human advisor to manage your investments. You can delegate that work to a robo-advisor instead.
Robo-advisors vary in cost, from free up to an annual asset management fee of around 0.75%. They can move money from your checking or savings account into your investment account on the schedule you set, invest in the asset allocation you like, rebalance it regularly, and even pull maneuvers like tax loss harvesting.
What they can’t do is talk you off the ledge if you fall prey to politically-induced panic. For that, nothing beats a human advisor.
Diversify Your Stock Portfolio
None of us knows the exact financial, regulatory, or tax landscape that the future holds.
Rather than try to predict the future, the wealthy often turn to diversification. One sector of their portfolio may suffer under a president’s policies, while another might flourish.
Diversification starts with a stock portfolio that includes both U.S. and international stocks. Diversify further with stocks in every sector of the economy, at every market capitalization. You can buy shares in index funds that mirror the S&P 500 for exposure to large-cap U.S. stocks for example, or one that mirrors the Russell 2000 for small-cap stocks.
For that matter, you could keep it even simpler and just buy shares in Vanguard’s Total U.S. Stock Market ETF (VTI) and Total International Stock ETF (VXUS) for broad exposure across the spectrum.
Consider Real Estate and Alternatives
The wealthy don’t stop at diversifying their stocks.
Tiger 21, a network of ultra-wealthy investors, shared that their members actually prefer investments outside of traditional paper assets like stocks and bonds. Their average member puts the highest share of their asset allocation in private equity investments (29%), followed closely by real estate investments (27%), according to CNBC.
Again, you don’t have to have a seven- or eight-figure net worth to follow suit. Look into passive ways to invest in real estate such as private equity syndications, debt funds, private notes, and private partnerships. Consider starting with a passive real estate investment club to keep your minimum investment low and to take advantage of other members’ expertise.
Lean on Tax-Advantaged Accounts
Whether you think taxes will rise or fall under a future president, you can invest through a tax-advantaged retirement account.
A Roth account lets you pay taxes now, and never again. A traditional account gives you the tax deduction this year. If you must make a political prognostication on tax policy, do it in the context of choosing a traditional versus Roth retirement contribution.
Either way, you’ll save on taxes while building your nest egg for the future.
Final Thoughts
To escape the cycle of fear and outrage peddled by cable news and slanted reporting, consider going on a news diet.
The 24/7 news cycle is addictive, but not productive. Consider the possibility that 10 minutes of news summary each day is enough to keep you informed, without buying in too heavily.
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This article originally appeared on GOBankingRates.com: 6 Things Wealthy People Do With Their Money Ahead of an Election
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
