Investors Should Be Politically Agnostic
This is a crucial time for individual investors. We have talked with many of them over the last few weeks. Few have a clear plan of action. There are three distinct groups.
- Some have abandoned equity investing. Cash on the sidelines has never been higher.
- Others are interested, but frightened off by the incessant negative commentary. Jim Cramer has joined the party on this one, endorsing a theme we have pursued for many months.
- A final group is discouraged that they did not catch the March bottom. They are worried about being too late.
Meanwhile, there is little help on the Internet. Sure, there are many sources, but they are all seeking higher hit counts and ad revenues. One might as well get investment advice from Dancing with the Stars!
Advice for Investors
With this problem in mind, we are going to focus a few more articles on the individual investor problem. Let us start with the biggest current issue: Politics.
It is great to live in a free country. We can all have political opinions and enjoy freedom of expression.
Here at "A Dash" we recommend political agnosticism. In the Bush era, many thought that we were of staunch GOP upbringing (perhaps a good guess?). In recent days, others suggest that we are Obama apologists. OK.
Our actual philosophy is that we want to earn investment gains for clients regardless of the political circumstances. We do this by analyzing policies and determining likely outcomes, just as we did in the old days. It is a lost art.
Most people have a political agenda. They get on TV or get a writing gig and confuse politics with analysis. This is no way to make money.
Starter Question
Today's big story centered on 100 days of stimulus. We plan some detailed analysis, but let us consider the first reactions. Readers have a clear choice:
Are you focused on politics or investments?
Some critics said that the stimulus plan was poorly designed, too expensive and mis-directed. Others said that it was just getting started.
What are your feelings? Are you expressing heart-felt political opinions or are you trying to make money?
Prof,
Can one truly do this? Could you dutifully profit for your clients from something that was against your personal convictions? Could you profit in the short term from a policy that would hurt your clients in the long term? Should you stay quiet or advocate for the best policy?
I may be drawing too fine a line here, but I would agree investors should be agnostic about political parties, but not policy. Policy matters tremendously to investors. This may be your point, in which case we agree. My view is that the factors driving long-term investment returns are highly dependent on public policy. As such, I need to closely follow the policy debates and highlight for others how potential policy shifts can impact their portfolios. The challenge to me is not about being agnostic, but about being honest and mindful of my own biases.
For what it’s worth, I tried blogging a few years ago and I couldn’t get around this issue. I wrote things as if I was a pundit, not an investor and the result was poor. Thanks for your perspective, and for your blog.
The professor’s point is well taken. It is interesting that the most vocal critics of current policy were silent on the policies that created the mess we find ourselves in now. People, policies and markets are dynamic, and investors should be mindful of that reality over their preconceived notions.
It’s hard to separate emotions from investing. Politics for most folks is emotional.
The best approach is to find an investment system that allows you to operate at a level of detachment that you are able to achieve from all things emotional, not just political. Since most people make most of their decisions emotionally, this also applies back to many things besides investing.
Live long and prosper.