Anymore, politics can be full of vitriol, division, and disinformation. The news cycle works fast and comes at us hard. It can be overwhelming, and it can easily affect our investment strategies. Remaining impartial in your investments is key, though. In this blog, we’ll outline a few reasons why we believe it’s best to keep politics out of your portfolio.
- Emotional investing is risky: allowing your personal beliefs to dictate investment decisions can lead to consequential impacts on your finances. It’s best to view investments pragmatically to ensure a diversification of your portfolio and to avoid overlooking a stock or sector for political reasons.
- Diversification is key: Maintaining a well-rounded portfolio reduces risk of your investments plummeting if one sector takes a hit. Prioritizing political considerations can jeopardize that balance. Diversification can also provide protections against political uncertainty.
- The market is impartial: Historically, the market has done well under both Republican and Democratic administrations. The market’s growth seems to be less about political leadership and more about broader economic factors, global events, and advancements in sectors like technology or pharmaceuticals.
- Political predictions can be Unreliable: One party just won the presidential campaign, with promises to enact all kinds of policies with market-wide implications. However, the legislative landscape and shifting public opinion can influence the trajectory of these policies. There’s no guarantee that these policies will come to fruition, so why risk your financial investments?
- Long-term perspective: Elections or policy shifts might induce short-term market fluctuations, sure. But in the grand scheme of things, these events are often impermanent. Investors who can see the forest for the trees and avoid being myopic on political happenings tend to experience more consistent growth.
Finding success in investing lies in making logical decisions based in financial principles, not emotional or political considerations. By keeping politics out of your portfolio, you can better ensure financial growth and security. And when in doubt, consider speaking to a financial advisor for a second opinion.
Information provided by Valorem Financial and written in collaboration with Oechsli, a non-affiliate of Cetera Advisor Networks, LLC and CWM, LLC.
A diversified portfolio does not assure a profit or protect against loss in a declining market.
The opinions are those of the writer, and not the recommendations or responsibility of Cetera Advisor Networks, LLC, or its representatives.
