3 reasons to keep politics away from your portfolio

American investor Warren Buffett once said: “If you mix your politics with your investment decisions, you’re making a big mistake.”

He qualified this by saying he’d always followed and taken an interest in politics. However, he’d never allowed who was in the White House to shape his investment decisions.

This is sound thinking. Politics can be very emotive and filled with shifting rhetoric, and governments are generally short-lived.

Investment decisions are best taken with a cool, clear head and a focus on the long term, not clouded by political opinions.

Volatility and recovery are normal parts of the stock market cycle

Politics can be divisive. All you need to do is look at the headlines from different media outlets to see how we can be collectively guided – or misguided. It’s incredibly difficult to take an objective view, with politics seemingly pervasive in all areas of our lives.

But while it can be natural and commendable to take an interest in domestic and international politics, when it comes to your finances, you need to keep your attention firmly focused.

Look straight ahead down your own long-term path, without being swayed off course.

The media loves to shout about stock market volatility, and it can make you feel uneasy as an investor. But volatility is normal – it’s simply part of the stock market cycle.

To give some context, data from Schroders tells us that world stock markets (as represented by the MSCI World Index) experienced drops of 10% in 30 of the 52 calendar years prior to 2024.

So, while it can be tempting to simply blame the politics of the day, stock markets are inherently unpredictable, no matter who’s in charge.

They react to unexpected events and often remain resolute when they should crumble.

Here are three good reasons to keep politics separate from your portfolio.

1. Elections don’t tend to bother the stock markets

Election periods can be highly charged, emotional, stressful, and unpredictable. They can also sometimes be exciting. But none of these conditions are conducive to calm, focused investing – and historically, election results have had little impact on markets.

Research from Vanguard shows us that the impact of the UK general election on balanced portfolios and stock markets has been minimal.

They analysed the performance of a balanced portfolio of 60% UK shares and 40% UK bonds between January 1987 and May 2024, during which time there were 10 election periods.

This revealed that the annualised compound return around election periods was 7.8%. In non-election periods, it was 7.3%.

So, while it’s perfectly natural to follow elections with anticipation and even apprehension, you don’t need to assume the outcome should trigger a change in your portfolio.

2. Time in the market matters more than timing the market

Financial planners love this phrase. “Time in the market beats timing the market.” In plain English, that means that if you try to “time” the market – that is, leave when it’s bad, stay when it’s good – you’re much more likely to be worse off than if you stay invested.

History gives us plenty of great examples of this, but we don’t really need to look that far back. In April 2025, President Trump sent shockwaves rippling across global economies with his trade tariff announcements.

According to the Guardian, the S&P 500 fell by around 6% that day, while the Dow Jones Industrial Average dropped by 5.2%.

However, the markets rallied remarkably and have continued to recover. The S&P 500 was up by 8% in August 2025, according to Time, and has remained buoyant.

The crux here is that if you had simply decided you didn’t like President Trump’s policies and had cashed in your investments, you’d have missed out on the stock market’s recovery.

Looking further back in time, the Schroders data tells us that, after the initial 25% decline of the Great Depression, investors who shifted to cash in 1929 would have had to wait until 1963 to get back to breakeven. If they’d remained invested, they’d have reached breakeven by early 1945.

An investor who shifted to cash in 2008, after the first 25% of losses would still be behind today.

So, tune out the political noise. Staying calm and taking a long-term approach to your investments will help you stay focused. Chopping and changing depending on who’s in power results in time out of the market – time in which your investments aren’t growing.

3. Control what you can

Ultimately, you have very little control over what’s happening in the political arena, other than casting your vote in elections. And you certainly can’t control global politics. Shift your focus to what you can control, which is ensuring you have a well-balanced and diversified portfolio designed to withstand temporary shocks.

Think of politics as the emotional side of the coin and investments as the practical side. Mixing the two is like oil and water.

Get in touch

If you’d like to talk to us about creating a balanced portfolio of investments or any other aspect of financial planning, we’d be very happy to help. Please email us at info@harperlees.co.uk or call 01277 350560 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.