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Don't worry about elections

For all investors, the biggest event in 2019 will be the Lok Sabha elections that will start in April and go till mid-May. Already the debates, on TV and social media, are getting louder and like every election year, the competing parties will make big promises.

So what should one do: 1. Don't let politics impact investing. Do your duty and vote but don't let the results affect your wallet. 2. Don't take the hype around elections seriously. It is great for news but not for investment. 3. Embrace uncertainty and use any corrections as opportunities to add to your portfolio towards long term wealth collection.

Let's take a look at 2 elections - one international and one local.

A. USA ELECTIONS Many people including large banks and hedge fund expected markets to correct if Trump won.

Billionaire hedge fund investor George Soros too believed in this theory and made huge bets on the market crashing. We all know of his bets in 1992 that almost 'broke' the Bank of England.

But his prediction that the markets would crash if Trump won turned out to be wrong and cost him nearly US$ 1 billion. What more, since Trump took office, the US stock markets have been in a bull market. The US economy has grown at a solid rate. And the US dollar has gone from strength to strength.

B. LOCAL STATE ELECTIONS On Friday, 7 December 2018, the exit poll results for the five state assembly elections - Rajasthan, Madhya Pradesh, Chhattisgarh, Mizoram, and Telangana - had predicted a bleak scenario for the BJP. This caused a sharp sell-off in the markets with the Sensex losing more than 700 points on the following Monday.

Later that evening, news of RBI governor Dr Urjit Patel's resignation added to the panic. After all, a poor outcome for the BJP in the state assembly elections and the sudden resignation of the RBI governor were enough catalysts for another big round of sell-off in the stock markets.

The next day on Tuesday the 11th December, the markets did witness a gap-down opening. But soon enough, the markets shrugged the bad news, started making their way higher, and closed the trading session in the green.

By Friday, 14 December, the Sensex not only reclaimed the losses witnessed at the start of the week but went on to close above the levels before the exit poll results came out.

There will always be uncertainties and volatility but if we stick to our goals and investment philosophy, involving right advisors, we will be a the long run.

Credits: Equitymaster. com & Livemint

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