Politics Regardless of Trump or Biden government: DFA investor Booth sticks to his investment strategy

08:15  22 november  2020
08:15  22 november  2020 Source:   finanzen.net

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DFA co-founder David Booth is of the opinion that the outcome of the US presidential election has historically only had a minor impact on the capital market. Instead, he calls on investors to hold on to long-term investments.

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• Booth's investment strategy detached from election results

• Praise for US innovations

• Invest sooner rather than later

"Vote on your ballot, not yours Life savings. "

David G. Booth, co-founder of the investment firm Dimensional Fund Advisors (DFA), explains in a comment published on "MarketWatch" why he did not let the result of the US presidential election influence his investment strategy. The investor states that this was the fourteenth presidential election he was allowed to vote in. Nevertheless, this differed from the first thirteen elections in that it took place in the middle of a pandemic. The fact that investors asked Booth in advance for advice on how to adapt their investments to both possible election outcomes would not have changed. "My quick answer is: vote on your ballot, not your life savings," said the investor. Accordingly, he does not change his investment strategy depending on whether the Democrats or the Republicans come to power. "This is one of the great advantages of being a long-term investor who thinks in decades, not days."

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Historical data show little influence of the election results

How detached the stock markets actually are from who sits at the top of the United States, Booth shows with historical data that his company DFA has compiled. For example, analysts have examined stock returns over the past 95 years and have concluded that they did not depend on whether the country had elected a Democratic or Republican president. Booth admits that the US presidents have influenced the economy and thus also the markets in recent years, but he and his employees have found no evidence that an investment decision depended on which party won. This also applies to this year's presidential election, which took place on November 3 and from which the Democratic candidate Joe Biden emerged as the winner. Booth explains this minor influence of the respective incumbent with the fact that four to eight years, i.e. one to a maximum of two legislative periods, are too short a time for investors. "What really matters over the long term is American ingenuity - products and services that solve problems," continued Booth. "For decades, it is American innovation that succeeds no matter what politicians do."

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diversification and advice lead to success

investing is a way for Booth to support people and companies who want to improve everyone's lives, for example by solving problems, helping to improve efficiency or looking at ideas that seem outdated in a modern way . Nevertheless, he could not say which company is now on the verge of its breakthrough. He therefore advises investors to diversify their portfolios as much as possible and not just focus on individual stocks. Here it can be worthwhile to seek professional help. "I also want people to speak to a financial advisor who can help them understand their goals and risk level so that they have the best chance of winning," said the investor. "I want you to remind yourself that the US market is not a reflection of who is president, but a reflection of the ingenuity of the American people."

"Power of the long-term investor"

According to Booth, investors should rather forge long-term plans instead of allowing their investment strategies to be influenced by elections. "If you focus on controlling what you can control and take the right amount of risk, you can get through the tough times and benefit from the good times." In uncertain market phases in particular, it is important to remind yourself that the markets adapt well to new developments and offer security. A look at the historical data compiled by his company tells him that it makes sense to invest sooner rather than later. "Imagine if you invested in [US President] Coolidge's administration - just before the Great Depression - and then left your money in the market to this day. Despite many ups and downs, I'm pretty sure you would with these returns would be satisfied. " According to Booth's calculations, investors would have received $ 4,000 for one US dollar today. "That is the power of the long-term investor who thinks in decades, not days. And that's how I will invest in the future - no matter who the president is." Finanzen.net editorial team

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