Should We Change Strategy Heading Into the Election?
As much as my two-pronged dividend strategy works in all markets, we still need to acknowledge that politics influences the market. Sometimes it’s a tangible impact like big swings in the price of oil. Other times it’s just investor sentiment moving the market.
Either way, it can affect the short-term progress of our portfolio.
I’ve seen countless articles trying to spot patterns and make arguments on how to handle your portfolio during an election year. It’s the big question on everyone’s mind. It’s even the theme of the Orlando Moneyshow this fall.
I always welcome the chance to talk about how to use my two-pronged dividend strategy through the election and into 2025. My presentation Build Wealth and Unlock Income in Any Market will take place on Saturday afternoon.
If any of you are Florida locals, or just looking for a good excuse to visit the Sunshine State, I would love to meet you in person. If you plan to make it, I recommend locking in early-bird pricing right now.
Some of my favorite investment minds will speak over the three-day event. But, if you can’t make it to Orlando, I’ll continue to guide you through the process right here.
Is It Time for Fight or Flight?
Before I give you my opinion on that, I first had to search for some numbers.
According to Fidelity, US stocks have returned an average of 9.1% in election years since 1950. The S&P 500 has so far done slightly better than that, up 12% year to date.
The S&P 500 has also historically averaged positive returns regardless of which party controlled the White House or Congress. The stock market actually does best with a divided Congress no matter if the president is a Democrat or a Republican (based on data from 1933‒2022, excluding 2001‒2002).
|
Generally, stocks keep going up over the long term.
As the Oracle of Omaha would say, “The stock market is a device for transferring money from the impatient to the patient.” Most of the time we aren’t trying to time the market. The plan is to hold our positions for at least a few years. Our Bedrock Income stocks could be held for a lot longer.
Pulling our money out of the market for some short-term event—like an uncertain election outcome—doesn’t make a lot of sense. All that said, we still need to listen to what the markets are telling us. And right now, I think we need to take a pause.
I don’t think we should be buying or selling right now. Instead, it’s time to review what we have and revisit our watchlist of stocks we would potentially like to add. That will prepare us to pull the sell or buy trigger when the market allows.
Every Market Swing Is an Opportunity
We know markets go up and markets go down. And sectors within the overall market go up and down as well. And of course, individual stocks can bounce all over the place. If the goal is to buy low and sell high, then we need to know exactly what “buy low” means so we can be on the lookout for those opportunities.
Having an up-to-date watch list means you’re ready to strike when the time is right. Your watchlist should also include your desired entry price for every stock. I calculate this based on the dividend yield I want to get.
Once armed with your desired entry price, it’s just a matter of waiting for the right time to buy. No trying to time the market. When the stock hits our entry price, we buy shares.
We should also regularly reevaluate the stocks in our portfolio, and think about what parameters we want to see before we sell them. I like to think about our share price gains in terms of years of dividends. If the gain on a stock is the equivalent of 5 or 10 years of dividends, why wait? Take that money today, free up some cash, and redeploy the money in another income opportunity.
This is exactly what I’m doing with the Yield Shark portfolio this month. It’s how we’ll be prepared for the election, and for the anticipated interest rate cut next month.
|
For more income, now and in the future,
Kelly Green
P.S. In February, I gave my readers a speculative play for the election cycle. It’s a bet on political ad spending with a shorter expected holding time than normal. Once it goes ex-dividend at the end of the month, we’re going to move the position to a hold and just ride it out. If you want all the details, you can try out Yield Shark today with our money-back guarantee.
Scroll down for comments.