Worried about how to invest before the presidential election? Here are a few tips for navigating these next seven weeks.
Election season is now in full swing. In less than seven weeks, or only 49 days, the country will select its next president, representatives from all 435 House congressional districts, 35 senators and 12 state governors. As we all know, this election has plenty of controversies, not only about the various candidates but also about a wide range of political and previously non-political-but-now-politicized issues. These issues are real and the stakes are high. It’s easy to get caught up in the pre-election gravitational pull. And it’s important to know how to invest before a presidential election.
While the pandemic had subdued the campaigns for much of the year, the strength of the election day gravity will only accelerate from here. It’s nearly impossible for media coverage to remain neutral, and even neutral-ish coverage can be viewed as partisan this season. Media editorial commentary, combined with a likely surge in advertising and other promotions, along with the presidential debates starting on September 29, all of which are by definition partisan, only heighten the news flow that draws in our attention like an interstellar black hole. The closer we get to November 3, the more powerful the pull. By election day the news flow gravitational pull will be so strong that nothing will escape its overwhelming power.
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How to Invest Before a Presidential Election? Don’t Get Emotional
To successfully navigate this abyss, it is critical to remember to separate political views from investment views. In the ideal investment mind, election-driven emotions play no role. Rather, the mind focuses exclusively on the objective merits of each potential investment. In the real world, our minds mix together all sorts of emotions and investing ideas – and the accelerating gravitational pull of the election can cloud good investing decisions.
I once met a successful investor who made no investment decisions up to 45 days before any presidential election just to avoid these risks. Perhaps he was channeling the ancient Greek mythology hero Odysseus, who made his crew tie him to the mast so that his crew wouldn’t follow his commands lest the Sirens draw his ship into the rocks.
One tool to help identify and weaken the emotional pull from the election is to ask, “Is my investment decision based on what I think will happen, or is it based on what I think should happen?” The should is probably based on the emotions, whereas the will is more likely to be based on reason. Either way, simply being aware of the risks is probably half the cure.
Investing smartly is hard enough with all the usual noise and now the pandemic-related complications. Investing smartly during an election season is challenging at best. But remember, it will all be over (hopefully) come November 4.
Now, if you feel you need help navigating the choppy investing waters these next seven weeks – and beyond – you can subscribe to my Cabot Undervalued Stocks Advisor newsletter, where I specialize in recommending stocks that have an attractive blend of growth and value. Right now, there are plenty of good growth and value stocks out there!
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Editor’s Note: This post is was excerpted from the latest issue of Cabot Undervalued Stocks Advisor.
Bruce has more than 25 years of value investing experience, managing institutional portfolios, mutual funds, and private client accounts. He has led two successful investment platform turnarounds, co-founded an investment management firm, and was principal of a $3 billion (AUM) employee-owned investment management company. Now he is helping his Cabot Undervalued Stocks Advisor readers find those undervalued stocks that let you buy low and sell high!Learn More >>