I often end my podcast season with a Q&A session. Listeners submit all kinds of questions, so I thought it would be helpful to include those I was asked after the Planning with Purpose episodes were broadcast, along with my answers, so my readers can benefit too.
Should politics play any part in investment decision-making?
The short answer to this is NO. Whether it’s politics or economics or like the situation 20 years ago, the Millennium Bug, any time you consider using events which are out of your control to determine investing decisions is utter madness.
For example, what if the outcome of an election was a hung parliament? What might happen? Possibly a short-term decline in the pound and markets as a whole in the UK are likely to fall, but the FTSE100 will probably be OK and may even rise. If markets drop, you may see this an opportunity to invest.
If you have held cash on a platform ready to push the button and place the trade as soon as you knew the outcome of the election, if you’re buying ETFs the money will land and buy the funds pretty quickly, because they are constantly traded throughout the day.
If you’re buying open-ended funds, then your trade, if it happens before say 11am, will bag the fund price at the close of play, some five or six hours later – a lot can happen in that time. If you miss the lunchtime deadline, the price you buy in at will be set at the end of the following day, because open-ended funds are priced once a day. Even more can happen in nearly two days of trading.
Ultimately, making investment decisions like this is a toss of the coin. You’ll either win or lose. But if you invest and hold, you’ll ALWAYS win, given enough time. If you’re worried about any political outcome, hold off investing until things settle down. Don’t lose sleep over an investment decision because my suggestion is to always invest and hold no matter what.
But if you invest across the globe in a multi-asset approach, the UK general election will probably affect a fraction of your portfolio anyway, so who cares? Please don’t ever think you can win by timing the market. Unless you’re Nostradamus, you’ll get it wrong more times than you’ll get it right.
You’re just as likely to guess the outcome of a coin-toss. Either you’ll hold and buy the markets when they’re cheaper, or they’ll go up and you’ll have lost out. No-one knows. The only eternal truth is that markets always rise, given long enough.
Missed the final post in the Planning with Purpose series? Or ready for another Q&A post?
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