In this video I’d like to offer TWO investment suggestions to consider during an election season…
The first is, DO include portfolio guardrails if you’re susceptible to making emotional decisions: Not everyone has monk like self-control allowing them to stay totally unemotional during a presidential election. Instead of trying to suppress the desire to act, which may not always be possible, I typically recommend clients open a small “cowboy account”. This account, which should be limited to 5% or less of their investible assets and can be used to go wild on any gamble they wish. This will allow them to satisfy their urge to speculate based on political outcome while keeping their serious money insulated from imprudent decisions. In the likely scenario that the cowboy investments don’t work out, it won’t derail their finances. If things do work out, which is great, the investor will have the satisfaction of participating in these investments.
Along the same lines of mitigating impulsive investment mistakes, the next suggestion is DO talk through your investment thesis before making any decisions: Many organizations establish an investment committee for proper oversight of their investments. It’s an equally important concept for individual investors to consult an unbiased third party before implementing any investments, as well. I do not mean a friend who you casually schmooze with at the shul kiddush or on the golf course. Rather, this individual should be knowledgeable and someone outside your social circle to minimize groupthink, who you can bounce ideas off of, and challenge your investment thesis. This may be your financial advisor or another unbiased individual.
Simply taking the time to discuss your investments before executing them helps minimize impulsive decisions based on your own political biases.