Financial experts advise against allowing the presidential election to impact your investment decisions.

• A majority of investors (57%) surveyed by Betterment expressed anxiety about the upcoming election.
• Experts suggest that maintaining a diverse portfolio and increasing savings may be smarter than adjusting investments based on political developments.

Despite the belief that presidential election outcomes have a minimal impact on market performance, many investors are still apprehensive about the potential effects of this year's presidential race between President Joe Biden and former President Donald Trump on their investments.

According to a survey by investment company Betterment, over half of investors (57%) expressed anxiety about the upcoming election, while 40% anticipated making changes to their investments based on the election's outcome.

This spring, Betterment surveyed 1,200 individual investors from four different generations: Gen Z, millennials, Gen X, and baby boomers.

Despite the political climate, financial experts advise against making investment decisions based on politics. Instead, they recommend diversifying your portfolio and saving more.

According to Cathy Curtis, a certified financial planner and founder of Curtis Financial Planning in Oakland, California, it is not a wise investment strategy to place large bets against one political candidate winning over another, as the economy tends to remain stable regardless of who is in office.

Blending political opinions and portfolios

Curtis, a member of the CNBC Financial Advisor Council, stated that her clients have shown increased confidence in the market this year. The S&P 500 and NASDAQ have consistently set new records in 2024.

"Curtis stated that the market is very stable, and clients are aware of this. He receives no anxious emails or questions about the market, and during volatile years, people pay close attention to market fluctuations."

Biden could potentially announce student loan forgiveness prior to the election. Almost half of Gen Zers receive financial assistance from their parents. The Fed may potentially reduce interest rates, which could increase the cost of your next trip.

A few clients who have visited Curtis have expressed concerns about Trump winning the election.

She links the increase in political anxiety she has observed recently to polarization, but advises her clients not to relocate their funds based on these emotions.

"Curtis stated that most of his clients are terrified of another Trump presidency, which leads to a great deal of anxiety when it comes to investing. However, he emphasized that his clients are generally well-informed individuals. Once they are presented with the facts, they tend to become less anxious."

According to Dan Egan, vice president of behavioral finance and investing at Betterment, it is increasingly common for investors to combine their political views with their investment portfolios. Egan observes that investors are modifying their portfolios based on their belief that a particular candidate will have a greater impact on the economy or stock market compared to previous election years.

Although the investor's behavior has changed, he stated that the outcome of presidential elections typically has not significantly impacted the stock market.

Since 1928, the S&P 500 has averaged 7.5% returns during presidential election years, compared to 8% in non-election years, according to a March analysis from J.P. Morgan Private Bank.

"Egan stated that the stock market tends to rise on average, regardless of whether you look at Democrats, Republicans, or anyone else. He emphasized that the president has limited influence on the economy, particularly in terms of inflation. This is why we have institutions such as the Federal Reserve to regulate the economy."

According to a survey by Betterment, 29% of investors planned to boost their savings account holdings in light of the election's potential effects.

Experts advise that it is wise to have a cash reserve due to high interest rates on savings accounts and other low-risk investments, but warn investors against keeping too much money out of the market.

"Curtis advised people to hold larger cash reserves because they can currently get good rates on their money. He added that it's okay if they don't want to put everything into the market."