The US election took over the news for months near the end of last year. Big events such as this often go hand-in-hand with comments about the share market and how it will be impacted negatively if the ‘wrong person’ is elected.
It can even become a major cause of concern for many. But we know, through our experience and through the perusal of financial data, that elections don’t actually affect the long-term profitability of major companies.
Take a company like Apple for example. While their headquarters are in the USA, their sales are worldwide. So regardless of what the election outcome was and what future election outcomes will be, companies will continue to operate as normal, and continue to make decisions based on what’s best for them as well as their stakeholders.
At Money Over 50, we do recommend that people spread their investments across multiple companies, for example buying shares in the largest 200 companies of Australia. Essentially, this is the opposite of ‘putting all your eggs in one basket’. If a company does go under, having money tied across several will balance out this risk. So why is that? It’s because every company has rivals. And where one fails, another soars, allowing you as the investor to pick up the difference.
Think of it this way: regardless of who wins an election, people’s spending habits will generally remain the same. Regardless of who is elected, the general public is still going to continue shopping on Amazon.
This, of course, doesn’t just apply to major elections. Generally, no external event will negatively affect big companies and the sharemarket in the long term, and you won’t lose out if your investments are widely spread across a number of companies.
Dallas Davison, Michael Hogue and Ali Hogue.