Is the government affecting your investing?There should be no surprise now that our government is dysfunctional.  It doesn’t matter which party you relate to, because anyone with common sense can see that we have a serious problem with our elected leaders.  If you want to really know how I feel about the subject, you can read my previous post about how the government needs to grow up.  This post is going to be a little different.  I want to talk about how these government issues are affecting my investment decisions and how it might be affecting yours.

My Investment Strategy

I am a relatively young person and because of this, I am what you call an aggressive investor. I  carry a lot of stocks along with some other forms of investments.  The reason why I do this is because I have many years before I actually retire.  I can handle the many ups and downs of the stock market.  As I grow older, I will pull back my aggressive approach toward a more moderate, then conservative approach.  I find this works best for me and I understand how and why I am doing it.

Since I invest my Roth IRA with Betterment, making my aggressive strategy work is super easy.  I have even done this same approach with my 401(k).  I was lucky to find some packages with my 401(k) provider that made aggressive investing much easier.  You will need to check with your provider to see what you can do depending on your investment strategy.

How The Government Actions Affect My Investing Decision

I am certain there are quite a few of you out there really wondering what is going to happen with the government and how the stock market will react.  I am certain that the stock market will react, but I never know which way it is going to go.  If I knew that, then I probably wouldn’t need to work.  I do check stock quotes and how the market is doing with services like Quotenet.  This gives me some insight in some stocks that I might want to add or dump, but it doesn’t move my overall investment strategy.

There have been many news organizations trying to figure out whether the stock market will react in a positive or negative manner with the current shutdown and the ever looming debt ceiling.  I am sure that most realize that the investor impact is unclear.

Since no one really knows what is going to happen, my plan is to do nothing.  I plan on continuing my investments and my account funding.  Even if there are a big drop in the stock market, I won’t take money out.  Why?

I don’t invest with my emotions.  If I allow my emotions to take hold of my investments, then I probably wouldn’t have much money in my accounts. Emotions cause you to make irrational decisions, especially when it comes to money.  When situations such as our government falling apart, it can be very emotional.  When you starting thinking about it, you will probably move your investments or stop investing.  I don’t recommend this.

Unless you are close to retirement or you don’t have a very diversified portfolio, then I would recommend that you sit on your investments.  Don’t let your emotions get the best of you.  If you are angry with your government officials, then tell them about it in the ballot box.  Don’t let their actions hurt your investments.  The stock market will go up and down over time.  It is a wise investment decision to just hold and ride it.

I would love to hear what you plan on doing.  Will you wait and see, then make your decision?  Will you continue to invest and just let it ride the ebbs and flows of the stock market?

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  1. Good post Grayson! We’ve not made any changes, nor we really make any. I pulled some gains a month or two ago and am simply riding out the storm as our view is a long term one. There is always something going on if you think about it which is why it can be dangerous to make your decisions based off of what you’re seeing on the news. That said, we have some cash we’re sitting on just hoping for a good pullback so we can jump in.

  2. I essentially left my investment strategy unchanged. I only update the allocation in my 401k once a year (maybe), and plan on continuing to contribute to my 401k same as I was before. I don’t do any individual investing so nothing is changing.

  3. I’m with you. The current turmoil has absolutely no effect on my investment strategy. I would say that even if you’re older it likely still shouldn’t have any effect, as your plan should still have incorporated the reality of ups and downs. Although no one knows the particulars ahead of time, the fact that there’s a new “crisis” is really not a surprise and really shouldn’t require a change in your plan.

    1. Great point Matt. I would say that if you are really close to retirement, that you could pull it out, but that means like really, really close to retirement.

  4. Your usual awesomeness, Grayson. We will do nothing different with our retirement investments. The only thing that this has really changed for us is it’s put a bigger fire under us to get out of debt.

  5. We don’t plan on changing anything. We’re long-term investors so we try to ignore blips on the radar. We also try to ignore what the government is doing whenever possible.

  6. I agree that the government needs to grow up. There is no better prof of this than when you see the mess they just got in with the shutdown. I don’t really plan on making any changes also.

  7. I’ve been wanting to make my ROTH contribution for this year but I think I’ll be holding off to see what happens October 17th. Ideally, I should contribute little bits all year and benefit from dollar cost averaging, but I didn’t have my act together.

  8. I agree. Although all of this is nonsense, I choose to invest in what I know will be a good financial foundation. No matter what happens, the right companies will find a way to survive. And I want to be right there with them when they do.

  9. We will continue to invest in the stock market despite what the government does. However, I will be putting more money into our rental real estate side business to diversify. That business is somewhat immune to the fluctuations of the stock market. I know housing prices can go up and down but I would be in it for the long-term income stream. I think with wise purchases, I can get 10% return on my money most years in real estate.

  10. The government can impact the stock market but not your investment decisions. If you can wait it out, the stock market will rise again if ever the impact is a negative one. It always does, right? One doesn’t have to panic and sell everything, he just needs to be patient. 🙂

  11. If they don’t sort themselves out by the 17th Oct there is going to be serious trouble. Cash and gold will be the only two investments that dont crash in value.

  12. Many people I talk to about taxes on capital gains and dividends tell me that if the tax rates get too high they are going to stop investing. I don’t see that happening unless taxation rates get really really really high (75%+). If someone can invest money and make a return on that money, especially if the investment is fairly passive, they are going to continue to make this investment over and over, pay their taxes and be (they should be) happy with the gain.

    Now, I do understand that there is a certain point where the tax rate will shift the risk vs. reward balance out of favor but I still think we are a long way from that.

    Do I want to pay higher taxes? No. Will I continue to invest even if the tax rates on capital gains and dividends go up. Absolutely!

    Thanks for the great article and your thoughts on how government decisions affect your investment decisions.

    1. Excellent comment Brent. I didn’t even think about the taxes, but I am with you. I will continue to invest even if taxes go up, but I wouldn’t expect them to shoot through the roof. That would be catastrophic and most people wouldn’t allow it.

  13. We have very little in non-retirement accounts that are in stocks, so we don’t plan on changing anything with the IRA or 401K’s. I still have plenty of years until 59.5.