As much as my two-pronged dividend strategy works in all markets, we still need to acknowledge that politics influences things. 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, advises Kelly Green, editor of Dividend Digest.
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. So, 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.
(Editor’s Note: Kelly Green is speaking at the 2024 MoneyShow Orlando, which runs Oct. 17-19. Click HERE to register)
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.
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.
