You should stop making all the mental bets

Good investing is about discounted future cashflow, behavioral management and having a long-term perspective. It’s not about partisan politics, religious beliefs, or any other emotion-driven belief system divorced from smart finance and the intelligent use of capital.

You might not know that, given all the new ETFs that target your emotional hot buttons. Marketing to fear and greed? It’s very 1990s. Tribalism, identity politics and ideology are how today’s savvy marketers reach into investors’ wallets.

We’ve seen this before.1 When investors allow their personal beliefs about faith or politics to influence their capital allocation in the past, and it hasn’t worked particularly well:

– Cashing in on Trump’s election

– Cashing in on Obama’s election

– Religious investment

– Nike and Colin Kaepernick

And many, many other examples.

The most recent entry in this method: $YALL (no, really).

as Eric Balchunas Note, “The God Bless America” ​​ETF screens companies that are “politically left and/or liberal with an emphasis on political activism and a social agenda,” then filters for low PE ratios and years of job growth. If it doesn’t raise a few flags, the cost probably will: 65 bps seems a bit pricey for a simple two-step stock screen.

I have no problem with your portfolio reflecting the values ​​and beliefs of an investor. This is true whether you invest through Sharia law, avoid vice stocks, support diverse boards or embrace sustainable investing. It should be a logical approach, one that leans more toward what you believe (or away from what you don’t) and is unlikely to negatively impact your portfolio. Any of these thematic investments that move your holdings too far from the benchmark index are likely to backfire over the long haul.2

This is why I consider sentiment-based ETF concepts to be a poor basis for stock selection.

Time and again, we see that a (non-finance) oriented investment belief system Always leads to poor performance or even damage. It’s just human nature, and unfortunately, most people seem unable to overcome their instincts.

Just because we carry evolutionary baggage doesn’t mean we can’t try to avoid those mistakes as individuals.

see more:
Logo wins (Dollars and Data, October 11, 2022)

in the past:
Why Many Investors Missed Nike’s Stock Rebound (March 27, 2019)

Investing based on how you vote is still a terrible idea. (October 3, 2018)

Don’t mix religion and politics with investing (July 9, 2018)

You Shouldn’t Buy Biblically Responsible ETFs (March 2, 2017)

Obama’s “radicalism” didn’t quite kill the Dow. . . (March 8, 2017)

Love Trump? Hate him? That’s no way to invest. (January 20, 2017)

Why Politics and Investments Don’t Mix (February 6, 2011)

Politics and investment

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1. “Vote on the first Tuesday of November, go to church on Sunday, but always bring a cool mental detachment to investment on Monday.”

2. I’m not a fan of low carbon ETFs for this reason: it moves the portfolio too far away from the index/benchmark. But it also attacks the problem from suppliers of those products while ignoring the demand half of the carbon consumption equation. What’s the point of not investing in Chevron, Exxon, BP and Shell when you invest in all their customers at the same time? It seems insidious, and it’s the same basic flaw in the war on drugs.

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