Your Money: One Crucial Investing Question: Are Your Goals Different Now?

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In the coming days and weeks, any tumult in the markets will probably be about a lot more than the companies we invest in.

We can never know for sure why the stock markets move as they do. But we can probably attribute any decline as these weeks of transition unfold as much to worries about how Donald J. Trump will conduct himself on the world stage as to concerns about how his economic policies will affect the profits of the corporations that make up those markets.

If a majority of your retirement savings is in stocks, however, you don’t care what the reason is. For many people, the temptation is to get out of the markets. And among some people whom Mr. Trump targeted with barbs and insults, there is palpable concern about much more than investments.

So stop. Breathe. People often regret big financial decisions they make in haste. And consider the following:

1. The S.P. 500 index of large American stocks is about where it was two years ago and nowhere near the depths it reached in 2009.

At this level, it’s still pretty far above the historical median for one crucial ratio of stock prices to earnings that the Nobel laureate Robert J. Shiller has developed.

So we may be due for a fall, one way or another, though a research note from Goldman Sachs on Wednesday noted that some valuations similar to today’s have previously led to 5 percent annualized returns in the next five years. Markets will do what they will do. But if you have been invested in stocks for a while now, you are most likely still a winner.

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2. Consider the statement you are making to yourself if you move all of your money to some kind of cash savings account, just to be safe.

Once upon a time — like, say, last week — you had an investing plan that was based on goals that may come years or decades from now. Perhaps you’re hoping to buy your first home. Maybe you’re trying to save enough to send a couple of children to college. You hope to retire by age 67.

Has any of that changed? If it hasn’t yet, then it’s not clear why your investments should.

3. But of course things have changed, and it’s about so much more than just the markets.

The man who is about to become president has bragged about abusing women, threatened to keep Muslims from immigrating and questioned whether Mexican-Americans can be impartial judges. If you don’t know someone who is worried sick about some or all of this, you’re not asking enough questions.

Still, a bet on stocks has always been a bet on capitalism. American investors tend to have at least half of their stock investments in United States companies, and many global companies sell plenty of goods and services to people in the United States.

So if you sell now and stay out of the markets for the foreseeable future, you’re doing one of two things. You’re either assuming that the election of Mr. Trump and all that he stands for means that investing in capitalism is now a sucker’s bet. Or you’re claiming that you will know exactly when the coast is clear and it’s safe to get back into your stock investments.

I can’t and won’t time the markets, and most professionals who try will fail if they make those bets repeatedly over long periods of time. My long-term bet remains on America and global stocks for now, with a healthy portion in international and emerging markets.

A Republican president with the House of Representatives and the Senate behind him can make a lot of change very quickly, and the stock market may fall a fair bit and be volatile for some time. Still, whatever Mr. Trump actually does will happen slowly, over many months. Given his history with the truth, he may not have meant everything that he promised, nor will he get his way on everything that he tries. But I expect to be happy that I stuck with stocks when I try to retire a couple of decades from now.

Retirees have a particular challenge here. Recent ones who are healthy, however, probably ought to plan on another 20 to 30 years of life, especially if there are two people in the household. That time horizon suggests the need for at least some stocks. Older retirees need to consider just how much their budgets could suffer if, say, a trade war sends stocks down 10 or 20 percent in a year or two. Perhaps it makes sense to park a couple of years’ worth of basic expense money in cash just to be safe.

4. If you simply cannot take the gyrations in the stock market anymore, you can make other choices.

You can buy bonds of various sorts, including municipal bonds that benefit citizens in cities and states that match your political leanings if you want to bet on only part of America.

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But history suggests that you will earn less in bonds than you would if you had invested in stocks. If that’s the result, then you’ll need to save even more money, work longer or live on less in retirement (or some combination of the three). That may be palatable if you’ve reached the limit of the anxiety you can tolerate.

Or you can invest in a business of your own, which is a big, concentrated bet and a risky one, too. Owning rental real estate is another possibility, since whoever does get to live here will need a place to reside.

5. There are many things in life that matter more than the stock market.

Family. The freedom to form a family, or not, in all of the ways that are legal now and bring financial privileges with them. Health and access to medical care that will not bankrupt you.

In the cloud of strong feelings that forms when we feel threatened, it is tempting to turn our backs on the system that allowed these perils to emerge. Doing just that is a real option for the small number of people who are able to emigrate or live mostly off the land.

But most people will not do that, last night’s Twitter chatter aside. They will stay and muddle through and raise their voices, too, and it will probably be easier if they haven’t locked in losses, moved their savings to the sidelines or sold out at the bottom of any further market declines.

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Article source: http://www.nytimes.com/2016/11/10/your-money/stocks-and-bonds/donald-trump-your-money.html?partner=rss&emc=rss