Millions of investors are understandably consumed by today's presidential election. They're trying to figure out which sectors and companies will benefit most and how to protect their money...
...if Clinton wins
...if Trump wins
Unfortunately, they're making a huge and potentially very expensive mistake, despite the best intentions and despite their well-founded desire to be proactive.
Politicizing your portfolio is the last thing you want to do.
With one exception.
If you're one of millions of investors and you're worried sick about today's outcome, you're not alone. Between the political angst and markets that fell nine straight sessions in a row, there's just not a lot to work with.
But there could be.
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What matters most right now when it comes to your money is how you think about the election - not what you think about the election.
This is where most investors who try to anticipate what's going to happen next get into serious trouble.
Take President Obama's campaign in 2008.
If you recall, he wanted to put gun makers out of business, turn healthcare into a national asset, and power our nation using all natural energy. His campaign motto was twofold: "Hope" and "Change we can believe in."
Investors who "voted" with their money back then - like many folks are trying to do now - got taken to the proverbial cleaners. Many damaged their portfolios to the point where they'll never recover.
More guns have been sold under President Obama's watch than any other administration. In fact, his election proved to be a bigger catalyst for gun sales than even the horrific events of 9/11. Sturm Ruger & Co. (NYSE: RGR) and Smith & Wesson Holding Corp. (Nasdaq: SWHC) are up 1,018% and 843% since the day he was sworn in.
Medical care has gotten prohibitively more expensive instead of cheaper. The iShares U.S. Medical Devices ETF (NYSE Arca: IHI) has returned 238% in contrast to the Dow's 124%, despite the fact that one of Obamacare's key features was a medical device tax and many analysts had investors believing that national healthcare was going to crater the industry.
And, last but not least, clean energy stocks, which were widely expected to scream higher on President Obama's watch have, in fact, fallen by as much as 75% over the same time frame.
Ergo... politicizing your portfolio almost never works out. The only guarantee that comes from trying to overcome past choices is depriving yourself of future returns.
Behavioral scientists like Dr. Meir Statman of Santa Clara University suggest that this is because investors cannot separate good choices that simply turned out badly for whatever reason from stupid decisions that they never should have made in the first place.
Which brings me to the one "vote" you actually do want to make right now.
Instead of trying to predict which candidate will be good for what sectors and which companies, rephrase the question and ask yourself which CEOs are worth your money.
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They're the ones you want to "vote" for.
Remember, CEOs lead because they have to be profitable. Politicians lead because they want to be followed. There's a big difference!
What I am suggesting doesn't have anything to do with being "right or wrong." Investors who don't understand that risk having their profit-taking strategy take a back seat to emotion.
What you're trying to do - what you want to do - is balance risk and reward in such a way that you both protect and grow your money. Contrary to what most investors think and what Wall Street would have you believe, they're not mutually exclusive.
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Business cycles, innovation, and growth are always far more relevant when it comes to your money than any singular person... even the president of the United States.
Take Team Zuckerberg, for example.
Facebook Inc. (Nasdaq: FB) reported a 55.8% increase in quarterly revenue that thrashed analyst expectations for the 14th quarter in a row. Total revenue jumped to $7.01 billion from $4.50 billion and beat estimates of $6.92 billion.
Will it drop to $1 billion next year because Clinton or Trump gets elected?
No way in hell.
More than 3 million advertisers and 1.7 billion users a month will keep things on track. Growth may slow based on who gets elected, but it will not stop and neither will the profit potential that comes with it.
The company will generate an estimated $22 billion in mobile advertising revenue in 2016, which represents a 67% increase over 2015 numbers, according to eMarketer. Total advertising revenue may jump 52% to $26 billion.
The company has returned 28.5% since I recommended it, versus only 4% from the S&P 500. And it's still a great choice even after a 6% haircut last week.
Or how about Becton, Dickinson and Co. (NYSE: BDX).
The company makes more than 2 billion insulin syringes a year, or more than 250,000 an hour - every one of which can be used once. At a time when the world is getting "bigger" and needs more medicine, that speaks to something we "must have" and many patients literally cannot live without.
It's returned 144.95% since I recommended it to subscribers, versus only about 64% from the S&P 500 over the same time frame.
I could go on with other examples but, no doubt, you get my drift. The only "vote" you need to make before the election is for a candidate that:
So turn off your smartphone, block out the Internet, and forget about the vitriol.
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