"Should I..." Series: Invest Now or After Election Day?

I have money in savings and want to invest it. Should I wait until after Tuesday, November 6 – the midterm elections – to get my money invested?

No matter who you are, there are likely two things that have crossed your mind recently: market volatility and political discourse. Thus, it would seem natural that both factor together when deciding whether now is the time to invest idle cash.

I was recently asked this very question, and along with that, I was asked what the market did recently. My response was that the market was higher than where it was a week ago and lower than where it was a month ago.

But so what? That is what the market has done. It does not tell us anything about what the market will do. And there is certainly no such thing as what the market is doing. Notice the subtle, but extremely important, differences there.

Markets don’t always act in ways that we think are rational. It is impossible to silo independent drivers of what makes the market go up or down for any given period of time. Election day, tariffs, taxes, earnings reports, jobs reports…these are all just some of the factors that we’ve heard about recently which work in beautiful harmony and can impact what drives market movements. Or at least our perception of what drives market movements.

To decide whether now is the time to get cash invested, focus instead of what you know and what you can control:

1.       We know that mathematically speaking, a dollar invested today has a higher expected return than a dollar invested tomorrow. Simple enough concept, but there is more to it than that behaviorally.

2.       How much cash am I looking to invest relative to my overall wealth or net worth? Is it a material amount or just another contribution in a long line of contributions?

3.       What is the money for? It goes without saying that if you’ll need this money for something in the short term, then it likely should not be invested at all. If this money is for long term wealth building and/or retirement, then it should be invested according to your overall investment strategy in accordance with your specific risk tolerance.

If you’re investing for the long-term and have an investment strategy in place, then what happens this week, next month, or the next 12 months is almost irrelevant. It’s also unpredictable.

Notice we haven’t even touched on the psychological factors that go along with sitting on cash. That is vitally important to understand, and we’ll cover that next time.