Presidential Elections and Investor Behavior

The markets have hit record levels since the presidential election.

How many investors converted their equity holdings to cash before the election in anticipation of a post “Trump” election crash? 

And what did it cost them? 

We know from the attached slide that missing just a few days in the market over the course of one’s investment lifetime can have a dramatic impact on their returns.

The attached slides show the impact of missing just a few days in the market.  The first column is the S&P 500 for 1970 – 2015.  The fifth column shows what happened to an investor who missed the best 25 days in the market for that 45-year period.

Missing 25 of 16,425 days (0.00152207%) costs the fictitious investor 3.4% annualized over that 45 year period.  Not 3.4%…  3.4% per annum!

The bottom line is that the biggest impediment to a successful investment experience is the investor’s behavior – reacting to news about the market and making bad decisions.