Successful investors use information about the future as well as other factors to choose the investments with the best chances of providing the rates of return that fall in line with their reasons for investing. While there is a limit to how much U.S. presidents can affect the factors that will determine the value of stocks and other investments, their influence is nonetheless immense, meaning that the election of Donald Trump on November 8 of 2016 will have an effect. As a result, investors should be scrambling to make sure that their investment portfolios have been updated for said circumstances, thus enabling them to capitalize on potential opportunities while also fending off potential threats.
Here are 10 tips for investing during a Trump presidency:
1. Focus On the Long Run
The rates of return on stocks can see enormous fluctuations from period to period, but it is important to remember that stocks tend to become more valuable in the long run. As a result, most investors earn their returns by investing in stocks for the long run instead of getting too caught up in short-term transactions, which can be profitable but calls for not just considerable expertise and experience but also vast amounts of time and effort that most investors cannot spare.
2. Focus On Controllable Factors
People who can predict the future can make outstanding returns when it comes to investing. Unfortunately, most investors lack the capabilities to make accurate predictions on a consistent basis, meaning that it is smarter and more sensible for them to focus on controllable factors on their costs, taxes, and exposure to risk. For example, most investors should build their portfolios with the resilience needed to weather economic shocks instead of attempting to earn a big return by predicting its exact timing.
3. Don’t Get Emotional
Getting too emotional is one of the biggest mistakes that people can make when it comes to investing. In fact, it is so common that it causes the stock market to over-react to the latest news on a regular basis, with the result that there are successful investors who make a living through contrarian investing. As a result, investors should never make investing decisions while they are caught in the throes of powerful emotions such as fear, anger, and happiness because they are inimical to the cold, sober thought that is the foundation of successful investing.
4. Stop Checking the News So Much
In other words, investors should stop checking the news so much because doing so increases their chances of making rash, rushed choices. This is not saying that investors should never check the news for information that can be used to inform their investing decisions, just that they should not be doing so on a regular basis. Something that has become particularly common ever since the popularization of smartphones has made it possible for people to do so whenever and wherever they want.
5. Consider Precious Metals As a Hedge
Precious metals are a poor choice for investors who want to make a profit, but they are an excellent choice for investors who want a hedge. This is because precious metals tend to be counter-cyclical in nature, meaning that they become more valuable in bad economic times and less valuable in good economic times because of a common misconception that they possess “intrinsic value.” In fact, some people have become so concerned about what will happen under a Trump presidency that gold is already seeing some movement.
6. Invest in Financial Stocks
Chances are good that a Republican-controlled federal government will not be instituting new rules and regulations for financial institutions. In fact, there has been some muttering about them removing existing rules and regulations, though it remains to be seen whether that will happen or not. Regardless, this expected course of events has resulted in rising interest in financial stocks.
7. Invest in Healthcare Stocks
Likewise, there was speculation that Clinton would have pushed for drug price controls. Since that it no longer possible, there are a lot of healthcare companies that have benefited from increased investor interest. However, people who are planning to invest in healthcare stocks should make sure to consider the impact of a potential repeal of Obamacare as well.
8. Invest in Defense Stocks
The United States boasts the single most expensive military on the planet, which is the result of enormous sums having been spent on it by administration after administration. Given that the President-Elect has mentioned bolster the U.S. military, it seems possible that the makers of weapons, military vehicles, and other military equipment could see bigger orders in the not so distant future. Something that makes them attractive choices for investment.
9. Invest in Coal and Gas Stocks
Trump has been clear about wanting to loosen restrictions on coal and gas companies. As a result, investors should look into those stocks, particularly as the price of oil starts to rise again after the recent slump. At the same time, investors with significant investments in renewable sources of power should reconsider their investing decisions, though it might be too soon to get rid of them because there is still so much that remains unknown about what will be happening in that regard. In fact, considering the immense interest of people not just in the United States but also in other countries situated all around the world in renewable power, it is possible that said stocks will remain profitable in spite of what happens with the U.S. federal government.
10. Keep an Eye on Bonds
U.S. bonds are the natural choice for people who want stability rather than profit for their investment portfolios. However, the rates of return on bonds are unpredictable at the moment because there are a number of forces that could influence them in either direction. For example, people had been expecting the Federal Reserve to raise its reserve interest rates in December, which would have meant a corresponding increase in bond interest rates. However, that is now in question because of the economic uncertainties surrounding a Trump presidency. Furthermore, if Trump follows through with his promise to spend more on U.S. infrastructure, it is possible that bond interest rates will rise as more and more of them are issued. Summed up, interested individuals should keep a close eye on bonds while waiting to make a move because too much remains uncertain at the moment for them to be sure about the results.