The next presidential election may feel like a long way off, but with mid-term elections just a bit more than a year away, politicians will likely be making dry runs for their bid for president.
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Election cycles are full of policy promises that can impact the markets even before the next president is determined. It’s easy to get spooked into making moves you don’t need to. Here, financial experts recommended what moves you should — or shouldn’t — make before the next cycle begins.
Don’t Let Candidates’ Policies Drive Moves
Trying to predict how any presidential candidate will impact the markets is “fool’s gold,” according to Robert R. Johnson, a certified financial analyst and professor of finance at Creighton University’s Heider College of Business.
He pointed to Warren Buffett’s observation that “our country’s almost unbelievable prosperity has been gained in a bipartisan manner.” In other words, the U.S. economy has grown steadily under both parties, so betting on or against the market because of who might win isn’t a winning strategy.
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Think Long Term
Johnson advised that as long as you have a solid financial footing and keep a long-term time perspective, you shouldn’t “worry about the influence of politics on the markets.”
He added with a touch of humor, “And, if you don’t have a long-term perspective, you might want to try and get one. Investors should not concern themselves with broad market moves or the crisis de jour.”
Develop an Investment Policy Statement
Instead of reacting to political headlines, Johnson recommended developing an Investment Policy Statement (IPS) with the guidance of a credentialed fiduciary advisor.
An IPS is a written plan that defines your return objectives, risk tolerance and time horizon, while also accounting for factors like liquidity needs and tax considerations. “In essence, an IPS sets out the ground rules of the investment process — it is the document that guides the investment plan,” Johnson explained. Investing without one, he said, “is like driving without a roadmap or GPS.”
Importantly, an IPS shouldn’t be rewritten every time markets swing. It only needs to change when your personal circumstances do — such as marriage, divorce, children or other major life events.
Don’t Wait To Purchase a Home (If You’re Ready)
If you’re on the fence about buying a home and waiting for policy shifts or rate cuts under the current or next president, Shmuel Shayowitz, president and chief lending officer with Approved Funding, said there’s “absolutely no reason to wait to buy a home, especially if it makes financial sense for you to do so today.”
While rates may eventually dip, that’s often offset by rising home prices and more buyer competition. “Buyers should make decisions based on their current financial situation and not just political speculation. If you’re in a good position today, and the home you want is fairly priced, don’t wait for future opportunities,” Shayowitz said.
Build an Emergency Fund
There’s never a bad time to focus on beefing up your emergency fund, according to Aaron Razon, a personal finance expert at Coupon Snake. He recommended the common advice to save between three and six months’ worth of expenses.
Get Out From Under Debt
If you’ve already got more debt on your plate than you’re comfortable with, especially high-interest debt, Shayowitz urged, “it’s always smart to clean up your financial situation” no matter what is going on politically.
Political campaigns will always bring uncertainty, but your financial plan doesn’t have to. Focus on the fundamentals, and you’ll be prepared no matter who takes office.
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This article originally appeared on GOBankingRates.com: 6 Money Moves To Make Before the Next Presidential Election Cycle Shakes the Markets
