As the Republican National Convention wraps in Cleveland and the Democratic National Convention is about to start in Philadelphia, this is a timely opportunity to remind you that you shouldn’t mix your politics and your investments.
Salespeople and product-sales organizations are very astute at selling during political stress. They usually find a hook to sell their products…products that in most cases are not really in your best interest.
As Mike Piper points out in the Oblivious Investor, fear is a powerful sales tool. Salespeople exploit a person’s political views to instill fear and ultimately sell undesirable financial products. Those products are not only intrinsically bad, they come with a huge cost.
The pitch goes something like this,
- [Political event X] just happened or is likely to happen.
- As a result, the economy will take a nosedive.
- You should buy my product to protect yourself.
This strategy is popular because it appeals to people of vastly different political views. To lure in investors with left-leaning views, the pitch evokes a narrative that the markets are rigged by the financial elite. To draw in the right end of the spectrum, the pitch emphasizes over taxation, over regulation, or excess government spending.
The technique is also popular because it can be used to sell just about anything…
- The economy is going to hell, and that’s why you should buy gold.
- The economy is going to hell, and that’s why you should buy my market-timing newsletter.
- The economy is going to hell, and that’s why you should buy this annuity.
- The economy is going to hell, and that’s why you should invest in my hedge fund.
If the fact that someone is trying to play you with a sales pitch designed to sell any product to two contradictory sets of beliefs isn’t enough to drive you away, consider this. For the recommended product to be right for YOU the following conditions have to be met:
- The salesperson’s political prediction must be right
- The salesperson’s economic prediction must be right
- The salesperson’s product must indeed be a good solution to the proposed scenario
Good luck getting all that to be true!