How To Beat The Market: Invest During Odd-Numbered Years

Fidelity Investments conducted a survey of what investors think of the U.S. election and its impact on the stock market.

Seventy-four (74) percent of investors whom Fidelity surveyed believe the party that controls the U.S. government has an impact on the stock market. However, 14 percent of those surveyed believe the party that controls the Oval Office has the biggest impact, 28 percent believe control of Congress is more important to stock returns and 33 percent say it's important to have a combination of control in the Oval Office and Congress.

Meanwhile, only 15 percent of those surveyed are actually making changes to their portfolio, which means the vast majority of investors are sitting back and hoping for the best outcome regardless of who wins the race for the White House.

The Do Nothing Approach

Fortunately, the vast majority of investors are right to do nothing. Fidelity noted that elections have had little lasting impact on market performance, and the more important factors at play include the business cycle, interest rates, corporate earnings and a solid investment plan which is built around an "election-proof" portfolio.

A Bloomberg report reached the same conclusion in a deep-dive research report.

In fact, investors allocating their portfolio toward a Republican or Democrat win are actually better off just investing in odd-numbered years and pulling out cash in even years. Since 1960, the stock market returned on average 12.2 percent a year under a Democratic party and 11.8 percent under a Republican party. However, the stock market has returned 16.2 percent in odd years and just 7.7 percent in even years.

"The election may spur volatility — and active investors can try to take advantage of it — but for long-term investors with a solid plan, short-term market swings should be expected," said John Sweeney, Fidelity executive vice president of retirement and investing strategies. "It's important to take a long-term perspective. If you have a plan you like, stick with it. If you don't, work with a professional who can help you build one that will help serve you well, no matter what may roil the markets in the short-term."