StashLearn
Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Money News

Trump and Your Investments: Why You Should Ignore the Stock Market

May 23, 2017

2 min read

If you’ve been feeling nervous watching your investments these days, you’re not alone.

Recently, markets around the globe have been responding to all the political turmoil in Washington, D.C. 

Markets are reacting to the inability of the Trump administration to push its agenda of tax cuts, reduced regulations, and infrastructure spending according to various reports.

After rising for months, on Wednesday, the Dow Jones Industrial Average–one of the key market gauges, or indices, in the U.S.–lost 370 points, or nearly 2% of its value.

Similarly, the Standard & Poor’s 500, which represents a broad basket of stocks of some of the largest U.S. companies, lost 43 points, also a 2% drop in value. Those were the biggest market losses in eight months, according to Time magazine.

Check out: Trump’s Tax Plan: We Explain It

Here’s why you should take the long view and ignore the what’s happening in the market:

The stock markets are not the economy

While market indexes may go up or down in the course of a week, month, or even a year, they may not accurately reflect what’s going on in the economy.

Why is that important?

Economic strength is often a key factor in stock market performance, which generally reflects the performance of publicly traded companies. And when you invest in stocks, you are buying pieces of these companies.

In fact, since the recession ended officially in 2010, the U.S. economy has grown at about 2.5% annually. Key underpinnings of the economy are still strong, according to many experts, who forecast this growth will continue through the year.

Buy and hold your investments 

Over time, financial experts say the best strategy is to buy and hold. None other than Warren Buffett, the chief executive of conglomerate Berkshire Hathaway, also known as the Oracle of Omaha, recommends not even looking at your portfolio once you’ve made your choices. (Ideally, that should be a diversified mix of stocks, bonds, ETFs and index funds.)

Buffett is worth an estimated $73 billion, and has earned his wealth by investing in the stock of solid companies, and holding the investments.

“I would tell (investors) not to watch the market closely,” Buffett told CNBC in a recent interview. “If they buy good companies, buy them over time, and they will do fine ten years from now, 20 years from now and 30 years from now.”

Market data backs Buffett up: Over the last 100 years, a time period that includes both the Great Depression and the Great Recession, The S&P 500 on average has returned about 10%  annually.

Here’s the bottom line:

The economy will have good times and bad ones, and stock markets are likely to fluctuate significantly in the short run. Financial experts say the best strategy for most investors is to buy a diverse set of investments, and then hold on.

Keep reading: Warren Buffett Reveals 2017 Hits & Misses

 

By Stash Team

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
Technology Careers budgeting pop culture love and money
Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.