How to Invest with an Election Coming Up

As the election approaches, market uncertainty tends to increase. It can be challenging to know the best moves to make with your investments. While it’s impossible to predict the exact impact of election outcomes on the economy, having a strategy in place can help navigate this period with more confidence and peace of mind.

Here’s how you can approach investing during an election cycle:

Focus on the Long-Term

Election seasons are often marked by short-term volatility, with market swings driven by the latest headlines, polls and public sentiment. While the political landscape may cause immediate fluctuations, it’s important not to let these temporary shifts drive your investment decisions. Acting on short-term reactions often leads to poor outcomes, such as buying high and selling low.

Instead, stay committed to your long-term goals. Maintaining a steady approach based on your core investment principles will help you weather election-related turbulence and avoid costly mistakes.

Diversify Across Asset Classes

A well-diversified portfolio is one of the best defenses against uncertainty. Spreading your investments across different asset classes, such as stocks, bonds, real estate and alternatives, helps manage risk during unpredictable times.

During election years, certain sectors may experience more significant swings than others depending on proposed policy changes. For instance, energy, healthcare and technology are often affected by regulatory shifts. By diversifying, you’re not placing too much weight on any one sector, which helps reduce exposure to potential downturns in areas sensitive to political change.

Plan for Potential Tax Changes

Elections can bring changes in tax policy, so it’s critical to plan ahead. Depending on the outcome, there could be shifts in capital gains taxes, estate taxes or corporate tax rates that might impact your financial strategy. Now is the time to work with your tax advisor or financial planner to assess any adjustments you may need to make.

You may want to accelerate certain transactions or take advantage of existing tax laws before potential changes occur. While it’s impossible to predict the future, being prepared can provide more flexibility in managing your investments and wealth.

Take Advantage of Market Volatility

While market volatility may cause concern, it can also create opportunities for investors who are prepared. Election cycles often produce price dislocations, where certain assets become undervalued due to fear or overreaction. This can be a great time to buy quality stocks or other investments at discounted prices.

Having liquidity available or being in a position to act quickly can allow you to take advantage of these short-term dips and position yourself for future growth once the market stabilizes.

Avoid Trying to Time the Market

Attempting to time the market is challenging at any time. However, it becomes even riskier during an election. There are too many variables at play, and making decisions based on speculation often leads to missed opportunities and reduced returns.

Instead, consider maintaining a disciplined approach. One idea is dollar-cost averaging, where you invest a fixed amount at regular intervals. This can help smooth out volatility and prevent you from trying to guess the perfect time to enter or exit the market.

Assess the Impact on Your Business

For business owners, elections can bring changes that directly affect operations. Whether it’s new regulations, shifts in trade policy or adjustments to corporate taxes, it’s important to assess how different election outcomes could impact your company. Prepare in advance by holding more cash, diversifying income streams or re-evaluating your growth strategies. This planning can help mitigate risks to your business.

Stay Flexible

While it’s important to stick to your long-term strategy, it’s also essential to remain flexible. The political environment is unpredictable, and new opportunities—or risks—may emerge depending on the outcome of the election. Being open to adjusting your portfolio as conditions evolve can help protect your wealth and capitalize on new possibilities.

For help with all your wealth management and financial planning needs for 2025 and beyond, contact Illumination Wealth today.