Upcoming US Presidential Election Causing Uncertainty in the Markets. What Can You Do About This?

by Dominique Schuh

The S&P/ASX 200 index jumped 0.6 per cent at the open yesterday, but it dropped into the red and closed up 6.5 points, or 0.12 per cent, at 5412.4. Overnight the boost to sentiment from claims Democratic nominee Hillary Clinton had won the US Presidential debate lifted Wall Street 0.6 higher. The Australian dollar is hovering just below 77 US cents as traders wait for more potential clues from US central bank chief Janet Yellen on the timing of an expected interest rate hike.

What does this mean for you?
There is significant uncertainty in the markets around the outcome of the upcoming US election. For investors, the best way to handle this uncertainty around timing your market entry is to apply a "dollar cost averaging approach." This means you can stagger your entry into the market by applying a timed entry with smaller amounts. For example, instead of investing $100,000 in the market today, you could reduce your timing risk by making 4 quarterly investments of $25,000 over the next 12 months.

Dollar cost averaging is one way of reducing timing risk, but we also know that the more time you can give your investments, the less impact your entry timing will have on your final return. For a long term investment over a 20 year period or more, we know that only 2% of your rate of return is determined by timing. In contrast, 98% of your return is determined by what you're actually invested in. Therefore, time in the market is more important than timing the market.

If you would like to review your current structures, contact us today here or call us: 5482 2855