July 18, 2024

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The unusual opportunity of the U.S. election

Every four years, the U.S. presidential election delivers, right on schedule, a surge of uncertainty that some market observers insist will drown investors who don’t act now!

We know better. We know the biggest risk investors face is changing course, perhaps in a panic, succumbing to uncertainty amid sensational headlines and getting it wrong. The Vanguard principles for investing success, intended to guide investors steadfastly toward their long-term horizon, are perhaps never more useful than at times such as these.

That the election arrives with plenty of notice gives investors an unusual opportunity to gauge how comfortable they are with uncertainty, a phenomenon that our investing principles contemplate.

‘But this time is different’

It’s fair to say that this election presents some unusual circumstances for the markets. While we hear “But this time is different” with every presidential election, there’s a grain of truth in the assertion this time around. The backdrop of 2020, with a pandemic that presents global economies with their greatest challenge in decades, gives the phrase particular resonance. So does the prospect that, given significant numbers of Americans may opt to vote by mail in response to the pandemic, we may not immediately learn who has been elected president.

Such a scenario would push uncertainty to another level—and make our investing principles all the more important. But what is best for portfolios is no different from past election cycles. Hastily changing course, making portfolio changes in response to short-term events, doesn’t work, even in unusual circumstances.

Those who would advocate making portfolio adjustments based on candidates’ proposals would be well-served to consider that the policy proposed today may look very different from the policy eventually implemented—if it is implemented at all. Investors who aim to get ahead of developments not only have to correctly predict election outcomes, they also have to correctly assess which policies may be implemented and how they may play out in the markets in relation to other policies. It’s a calculus that challenges even professional money managers.

Those worried about potential election-related volatility need to remember that volatility works in two directions, that the best and worst trading days frequently happen in proximity to each other, and that correctly timing a market exit can be counterproductive if you don’t also correctly time a return to the market.

You do have control

Remember that long-term investing success doesn’t rely on short-term market developments. It relies on economic growth, interest rates, productivity, innovation, and dozens of other factors. And it relies most on being fully invested in the markets for the long term, according to your well-considered investment plan.

Our principles focus on what investors can control: having clear, appropriate, attainable goals; developing a suitable asset allocation using broadly diversified funds; keeping investing costs low; and maintaining perspective and long-term discipline.

So much of what happens is out of our control. The U.S. presidential election gives investors a unique opportunity to confirm that what really matters to their success remains in their control.


All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Diversification does not ensure a profit or protect against a loss.