Navigating investments during a General Election season

General elections often bring uncertainty to financial markets and the UK election is no exception. With pledges being made and manifestos being published, there is a lot of hype and uncertainty about what the future will look like.

A change in government might see investors feel tempted to panic, sell their investments and take large amounts of tax free cash out of their pensions. However, maintaining a steady course during this period may be crucial for long-term financial success.

In this article, we’ll explore why panic-selling is counterproductive and how to make informed decisions during election season.

The election jitters

When an election takes place, anxiety can grip investors. Questions arise: Will policies change? How will the economy react? While it’s natural to be concerned, rash decisions can harm your portfolio.

Remember that markets have weathered political transitions before. Looking back at past elections, we see that markets tend to recover after initial volatility. For instance, the S&P 500 index has historically rebounded within months of election-related dips. Selling during uncertainty often means missing out on potential gains.

Tune out the hype

Media headlines can amplify election drama. Tune out sensationalism. Base your choices on research, not fear. Consult reliable sources and consider the bigger picture.

Your long-term goals and investment strategy should guide your decisions, regardless of election noise. Avoid knee-jerk reactions based on short-term events. Remember that markets are cyclical, and downturns are par for the course.

Avoid predicting the future

Trying to predict election outcomes rarely pays off. The rules around the Lifetime Allowance are causing some stir with investors as Labour had originally said they would reintroduce the Lifetime Allowance rules.

Since the election announcement however, Labour made no mention of the Lifetime Allowance within its manifesto and the rumours are they have decided not to go ahead with the reintroduction.

People should consider the consequences of taking large amounts out of their pensions ‘just in case’. Funds within pensions are shielded from Income Tax, Capital Gains Tax and Inheritance Tax, so removing funds from such a tax efficient investment without a need for them, could be a costly mistake.

Diversification matters

By all means you should review your strategy, especially if you are heavily invested in one area. Diversified portfolios are resilient. A spread of investments across asset classes (stocks, bonds, property etc.) will go some way to reduce risk. When one sector wobbles due to election uncertainty, others may remain stable.

Seek professional advice

Independent financial advisors provide objective guidance. They’ve seen election cycles and market fluctuations and can use their expertise to review your investment strategy, advise you and prevent emotional decision-making. A trusted adviser will help you to stay grounded and avoid emotional pitfalls. Don’t have an adviser? Speak with one of our Financial Planning Consultants today for independent, objective advice and peace of mind.

Conclusion

With a change in government confirmed, resist the urge to make any hasty investment decisions. Stay informed, trust your adviser, and remember that elections are part of a broader economic journey. Keep calm, and your investments will thank you in the long run.