Will the General Election Affect Your Investments?
Vote with your heart. Invest with your head.
There’s a lot of things to worry about in the world, but, if managed properly, your investments should not be one of them.
When does the phone ring most in the office? Either just before a predictable large scale event such as a General Election or just after an unpredictable large scale event such as a market crash. Some clients are either keen to “get in” or “get out”, whilst others might just need reassurance that where they are is the right place to be.
With so much uncertainty, it can be difficult to always be completely confident in your financial security. Indeed, the recent science of Behavioural Economics has revealed how our primitive “fight or flight” instincts are ill-suited to the modern-day challenges of investing to achieve long-term objectives.
Most of us have an aversion to loss, meaning that losses have twice the emotional impact of profits. This means that we can’t correctly evaluate risk, an essential skill of a good investor. We also tend to be over-confident, believing that somehow we can be smarter than the market.
A financial adviser’s first responsibility is to steer their clients away from these emotions and stop them making catastrophically bad decisions with their money. It isn’t always conscious emotions that cause the biggest problems. A good adviser can help by uncovering the unconscious ones, discussing them and removing them from investment decisions.
More than ever we are bombarded with economic and political “noise” expressed in dramatic language to get attention. If something isn’t about to fall off a cliff there’s a pretty good chance that it’s already been lost in a black hole!
Do you have clear long-term investment objectives as part of a wider financial plan? Are your funds invested in well-diversified assets, that are appropriate for the risks you should be taking to achieve your objectives? Do you review these investments regularly with an adviser?
Yes to all these? Then relax, your investments will be working for you long after the latest General Election lurch to the left or the right.
If you’d like advice concerning how your finances or investments might be affected by the election, don’t hesitate to contact us.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.