Political Ideology and Investing
Published on Wednesday, March 15, 2017
Written by Brian Cochran, CFP®, CKA®, Financial Planner
It is hard to watch the news, scan social media or participate in casual conversation these days without engaging in political conversations or debate. Politics has certainly infiltrated every aspect of our lives and the results are not always positive.
I understand why politics is so important to people. The issues that currently dominate the news and social media—immigration, health care, abortion, education—are emotionally charged issues that no one should take lightly. As responsible citizens, we owe it to ourselves to be educated and involved in the issues of the day. We should also act on our beliefs in the way we live and vote.
That being said, I am concerned about the number of people who are allowing their political ideology to possibly impact their financial decision-making. Since the election I have witnessed both fear and euphoria among the clients we serve. My experience is not anecdotal based on the following poll from Gallup:
Within one week of the election the public’s outlook for the economy changed drastically. Rational? I think not. If these were only feelings, I would not be as concerned; but such feelings tend to influence our financial decision-making.
One of the greatest challenges in investing is detaching ourselves from the many emotions and biases we may face. The allocation of your investments—or whether you are investing at all—should not be determined by an emotional response to who is occupying the White House.
To help avoid letting your feelings hurt your finances I recommend a simple—albeit steely—process for investing.
- Determine an investment allocation based on your goals and needs and personal tolerance for volatility and risk.
- Commit to a strict, evidence-based strategy for implementing and maintaining your personal investment allocation.
- Avoid the temptation to change your strategy by limiting your consumption of news, looking at your accounts no more than monthly and ignoring stock tips and investment advice from your neighbor, plumber and brother-in-law.
A knowledgeable and principle-driven financial advisor can bring value to each of these steps. As an objective and independent third party, an advisor can identify emotional errors that you cannot see in yourself. At John Moore Associates, our investment process focuses entirely on your financial goals, and our investment management is evidence-based rather than emotionally-charged.
The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Brian Cochran and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected.