Investing In Stocks Is Not Investing In Government

One of the most common concerns of beginning investors is the fear that government interference in the economy or policy will take away the attractiveness of equity investment. More recently, these fears have intensified, as we are facing a rather tense electoral scenario with an uncertain outcome. It is logical that certain policies, especially those of an interventionist nature, tend to be viewed by the market as something negative, which causes some (or several) actions to suffer as a result of these measures. In some cases, they are speculative effects stemming from rumors, bills not yet approved, or other rumors that may be interpreted as negative for certain companies. In these cases, the actions of these affected companies may suffer, although the fundamentals remain intact. Opportunities are created. In other cases, government interference may in fact negatively affect a certain segment of the economy. It is possible that certain measures and laws may increase the taxation of a particular sector, reduce tax incentives, facilitate the competition of imported products, hinder new investments, change labor laws, etc. But is this effective interference by public agencies in the economy something that the investor should worry about? The answer is no. Below I have translated what Buffett said in his 88-year anniversary interview: "I've been buying stocks since March 11, 1942, regardless of who the president was. There were seven Republicans, seven Democrats. I do not know when to buy stocks, but yes, if you should buy stocks. " Of course, if Brazil were to turn a Venezuela (which some people still believe might happen) stock investment would not be worth anything, as companies would no longer have a healthy environment to operate profitably. But in this case, any investment would be useless over a reasonable time horizon. Fixed-rate securities would be eroded by inflation, as well as those post-fixed in interest rates or inflation (real price indices are much higher than disclosed). In fact, the Venezuelan stock index has been playing below inflation. Would real estate be an option? Maybe, but who could buy real estate or real estate rent-corrected for inflation missing food on the streets? Going back to less catastrophic scenarios, investment in stocks generally thrives under any political scenario. Because? There are a few reasons. Sometimes the market exaggerates in the discount after some unfavorable policy measure. This is the case of MP 579, which negatively affected the electricity sector. However, the discount to the segment's shares, such as Eletrobras, was higher than would be justified by the practical effect of this measure. Thus, a tremendous opportunity was created and for this reason, Luiz Barsi said that the Dilma "deserved a kiss in the mouth". In other cases, the discount is fair, but the effect is temporary. And over time, companies in one form or another can adapt to the new regulation. A company is a living, adaptable organism that shapes according to its operating environment. They held an interview recently with Barsi, asking if he would sell his shares if Lula or Haddad was elected. He joked that they could put the CCP boss to command the country that he would not sell. After all, Barsi invests in companies whose demand is practically a certainty, such as sanitation or energy. After all, who will stop paying electricity or water bills? Recall that he has invested in stocks since the 1960s and, like Buffet, has also gone through several presidents, including military dictatorship and periods of hyperinflation. There are centennial companies in Brazil, which have prospered under different political scenarios. More recently, the possibility of taxing dividends has been discussed. We have no doubt that if it is approved, it will be a bad thing for the stock investment. After all, your immediate income will decrease and it is likely that the actions of dividend payers will also devalue. Even so, equity investment will remain viable. Maybe companies will pass this tribute on the production chain, or the taxes in the chain will decrease to compensate, or companies will change their distribution policy and buy back more stock. Still, profit growth may surprise positively with a more robust Brazil, or else, dividend share prices will settle to lower levels and market yields will rise, partially neutralizing taxation for those who are still starting their social security card. In short, there are several scenarios that can occur. And to invest successfully, you do not have to worry about who the new president or other policy issues will be. Focus on the business you have in your wallet. It is very likely that good business managers will continue to adapt to continue making money.