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Election Investing 101: How to Make a Fortune from the Trump-Clinton War

Written by Charles Mizrahi
Posted October 18, 2016

How are you going to vote on Election Day this November?

For most Americans, the candidate that is going to get their vote will be the one they dislike the least.

You have to admit there’s a “better of two evils” theme surrounding this 2016 election. The latest polls show that Republican candidate Donald Trump has a 61.9% unfavorable rating, and Democratic candidate Hillary Clinton has a 54% unfavorable rating.

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Never before in U.S. politics have two candidates running for president ever had such unfavorable ratings.

This should come as no surprise — throughout this election, both candidates’ unfavorable ratings stayed consistently... unfavorable.

Like it or not, one of them will be sitting in the Oval Office on January 20, 2017.

Tax Proposals

The two candidates’ tax policies couldn’t be more different, and in case you’ve missed their positions amid the mudslinging, here’s what they want...

Hillary Clinton wants to add a 4% surtax on incomes over $5 million, raise rates on capital gains, and increase the top estate tax rate while lowering the estate tax exclusion.

On the other hand, Trump wants to establish three tax brackets of 12%, 25%, and 33%, and eliminate the net investment income surtax and the estate tax.

So now that you know something about each candidate’s tax policy... how should you position your portfolio ahead of the election?

Here’s the best thing you can do — NOTHING!

That’s right, we should sit on our hands and make our trades based on the election results.

Bear with me here...

When buying and selling stocks, your decision should be made on a very few variables, such as: is the stock trading much higher or lower than the underlying worth of the business?

Let me be perfectly clear: that decision should never be based on politics.

As a way of illustration, let’s assume your great-grandfather, not knowing much about stocks or finance, bought one share of Coca-Cola when it went public in 1919 at $40 per share.

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All great-grandpa knew was that he liked the taste of Coke and was an avid consumer of the product.

He then put the stock certificate in his important papers, where it laid untouched for the next 97 years!

Since grandpa was busy making a living and putting food on the table, he didn’t have time or interest to follow the stock price on a periodic basis... and that would’ve been a very good thing.

Right after the company went public in 1919 at $40, its shares lost 50% one year later, and the stock was trading for $19.

Several years later, the country went through the Great Depression, WWII, sugar rationing, entered the nuclear age, engaged in several wars, recessions, inflation, resignation of a president, etc. — during each event, he would have had an excellent reason to sell.

It’s a good thing he forgot he even owned the stock, because one share of Coca-Cola bought at $40, with dividends reinvested, would now be worth close to $10 million.

Now imagine if your great-grandpa traded the stock based on the latest economic report, threat of war, recession... or who would be sitting in the White House every four years.

You and your family would never have received this hypothetical fortune!

But even though there aren’t many investors with the discipline to hold onto a stock for such a long period, my point is that it’s the fundamentals of the company that have the most impact on how your stock will perform.

Everything else is secondary.

It’s more logical to stick to what is knowable (the prospects of the company) than trying to decipher the unknowable.

That’s how great fortunes are made.

There are very few traders that top the Forbes 400 list, but the ranks are filled with investors that saw great opportunities and held onto them tightly. 

Which one are you?

All my best,

Charles Mizrahi signature

Charles Mizrahi

Twitter: @IWPeditor

Charles cut his chops on the trading floor of the New York Futures Exchange before moving on to become a wildly successful money manager on Wall Street.

And with more than 35 years of recommending stocks under his belt, Charles has knocked the cover off the ball, compiling an amazing record of success and posting gain after gain for his loyal readers. He is the editor of Park Avenue Investment Club and the Insider Alert newsletters.

Charles is also the author of the highly acclaimed book, Getting Started in Value Investing.

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