By Lazetta Rainey Braxton, MBA, CFP® and Rianka R. Dorsainvil, CFP®
Leaders don’t often make important decisions without ample research, preparation and time for due-diligence. Mitigating risk is as smart a plan for a leader of a country as it is for a leader of a household.
As this year begins to wrap up, we’re faced with a surging pandemic, discouraging unemployment numbers and all signs pointing to a long winter ahead. As volatile as this year has already been...we face renewed fears of losing our livelihoods.
With a lot of uncertainty still to come, we must gently set our emotions aside to remain on solid footing. Let’s review all of the things that are firmly within our control.
Let History Guide Us
Find comfort in the fact that we can always learn from history. Educating oneself is a particularly brilliant way to quell fears and make informed decisions.
Like, when we are worried about how the markets will react to the presidential election. Now, we have some great reference points here. Consider the presidential cycle election theory.
First introduced in 1968 by Yale Hirsch, founder of the Hirsch Organization and creator of the Stock Trader's Almanac, the presidential cycle election theory details how a newly elected president impacts the markets.
Pick up any paper or log onto any news site in the past month and you’ve likely seen headlines that have sent a chill down your spine.
But, according to a recent article from The Balance, we shouldn’t put too much stock into these headlines. “Presidential election cycle theory held some water in the 20th century but isn’t so predictive now. In the 21st century, the stock market has surged in the initial year of several presidencies. For example, the S&P 500 index rose in the first years of the Trump, Bush, and Obama administrations.”
That’s all to say take these predictions like you would a campaign promise, with a grain of salt. You are in control of the news you consume and the choices you make to educate yourself.
We’re Not Market Timers; We’re Disciplined Investors
Investing is a long-term commitment, and constantly reacting to news will do nothing to further our bottom line. As we’ve said many times before… no one has a crystal ball. So, how can we pivot from the onslaught of frenetic reporting and keep our focus?
Trust in the process.
A financial plan is not a get-rich-quick scheme. It is a roadmap for how we can remain solvent and relatively comfortable during good times and bad; it is the navigation that leads us in the direction of our future hopes and dreams.
Take comfort in the fact that you are a disciplined investor, not a market timer.
You’ve done the work, now give the market some breathing room. It’ll settle down eventually. You are in control of the plans you have put in place, not in how the market will react.
Let’s Vote on You
This year has been a perfect storm of preparing for the unknown, battling multiple stressors, and considering worst-case scenarios. It’s felt unrelenting; we are fatigued.
And when we are tired and at our breaking points, we are more apt to make split decisions. Don’t let that be the case with your finances.
Understand that your decision-making will likely differ from your friends and families based on your unique needs. Just because a relative decides to pull half of his savings out does not mean you must either.
Stand tall, trust your decisions. The state of your union is strong. You are in control.