Have you ever wondered what weed, Tesla, and TLC have in common with Joe Biden? Probably not, but you’re about to find out.
If you were hoping this article would provide you with some secret stock tips to help you get rich over the next four years, I’m going to disappoint you. And frankly, that’s because anybody who tells you they know which stocks will go up while Joe Biden is president is full of shit.
Nobody has any idea what the stock market is going to do in the short term. I mean, think about all of the people who invested in construction companies when Trump became president thinking they were going to ‘build that wall’. None of those investors got rich because ‘that wall’ didn’t happen.
Instead of giving you garbage stock picks, I’m going to tell you why TLCs song Waterfalls gives great investing advice, how to invest in Tesla the smart way and why it’s a good idea, and why the weed industry could be a moneymaker during Joe Biden’s presidency.
Stick with Your Long Term Investing Strategy
Don’t go chasing short term gains. Please stick to the ETFs and index funds that you’re used to. Those are the lyrics to TLC’s song Waterfalls, right?
If you feel stressed and like you need to switch up your investment strategy because of all the stock market hype that coincides with a new president taking office, I have great news for you. You don’t have to switch up your strategy, and here’s why.
The Federal Reserve (Fed) has indicated that they will be keeping interest rates near zero for the foreseeable future. This is great news for stocks because low interest rates make competing investment options less attractive. Take bonds, for example. Bonds are attractive investments because they are safer than stocks, but when interest rates drop, so do the earnings bonds provide.
Since an investor’s goal is to make money, when bond rates are low, investors seek out other investment options that will provide a higher return. One great alternative for them is investing in the stock market.
For evidence of this theory, just look back at the stock market’s performance over the last decade. To stimulate the economy in 2008 during the Great Recession, the Fed dropped interest rates to near zero. Since then, rates have remained near zero, and the stock market has boomed.
So it’s safe to assume that over Biden’s first term, interest rates will remain low, and the stock market will rise. Because of this, investing in an index fund and/or ETF that tracks the S&P 500 is a relatively low-risk investment option that should provide good returns. Since many investors already have these holdings in their portfolios, there’s no need to change their investing strategy now that Joe Biden is president. They can just stick to the index funds and ETFs that they’re used to.
Buy Tesla Stock
Tesla is Added to the S&P 500
If you have serious FOMO because you haven’t started investing in Tesla yet, you’re not alone. I’m not going to tell you to go buy up a bunch of Tesla stock, though. Doing that will make your portfolio very risky. How? Because if much of your portfolio is invested in Tesla and the stock price plummets, you’re going to lose a lot of money.
I have great news, though. There’s a much lower risk way you can invest in Tesla stock. Buy an index fund or ETF that tracks the S&P 500!
Tesla was added to the S&P on December 21, 2020, which means you can now participate in the Tesla hype without going crazy, crazy like KC and JoJo with it. By investing in an index fund or ETF that tracks the S&P 500, you will own a fraction of a share of all 500 companies that make up the S&P 500 index. Since Tesla is now one of those companies, buying the S&P 500 makes you a Tesla investor, but in a much safer way.
The 500 companies that make up the S&P 500 provide diversification to investors. By investing in Tesla via the S&P 500, when (I mean if) Tesla’s stock price falls, you will have 499 other companies’ earnings to help offset your Tesla losses. Investing in Tesla this way allows you to participate in the Elon hype and avoid the potential devastation that a drop in Tesla’s stock price could cause.
Clean Energy Stocks
Another reason you should buy Tesla stock is because Tesla is a clean energy company.
On his first day in office, Biden already rejoined the Paris Climate Agreement and issued other environmental policy orders. He’s also proposed making radical changes to emissions standards to become a 100% clean energy economy by 2050. If this is any indication of how his presidency will go, I’d expect a huge push toward clean energy initiatives. With Democrats controlling the House, Senate, and presidency, these initiatives are much more likely to pass.
Reducing the effects of global warming may not be Biden’s only incentive for adopting clean climate legislation, though. With the impending recession the coronavirus has caused and coal miners still struggling to find work, these initiatives could also be a good opportunity for job growth. Since Tesla is a clean energy company and is already growing and innovating at warp speed, they should be well-positioned to benefit from these changes during the Biden years.
Buy Marijuana Stocks
“Smoke weed every day” isn’t just the lyrics to a Snoop Dogg song, but has also become a motto for many. Over the last decade or so, the number of people reporting that they’ve used marijuana in the last 30 days has increased, as well as the number of people reporting that they use marijuana 20+ days per month. That means there are more people smoking pot, and they’re smoking more of it.
The exact reasons for this are unknown, but the push toward legalization probably has a lot to do with it. Only 6 states remain where Mary Jane hasn’t been decriminalized or legalized medically or recreationally.
On top of states adopting legalization in large numbers, the MORE Act, a federal bill to decriminalize weed, passed in the House on December 4, 2020. The bill has since stalled in the Senate and was expected to fail, but that was before Senate control flipped to the Democrats after they picked up two seats in Georgia during the runoff elections. Getting the bill passed still won’t be a cakewalk, though. Democrats only have a slim majority and may still have a hard time passing the bill.
The MORE Act to federally decriminalize marijuana isn’t the only weed bill currently up for a Senate vote. Another bill called the SAFE Banking Act has also passed in the House and is awaiting a vote in the Senate. Unlike the MORE Act, the Safe Banking Act has bipartisan support and is much more likely to pass.
The great thing for your portfolio about the SAFE Banking Act passing is that it is intended to make it easier for marijuana businesses to access bank funding. That means cannabis companies will have access to more money to grow their businesses. If their growth efforts are successful, that means high returns for their investors.
With rising marijuana usage and consumption, and broadening legalization efforts, the potential for growth in the weed industry is high. (No pun intended.) Democrats also now control the House, Senate, and presidency, which may make this the perfect time to get a lot of legalization legislation passed.
Investing in marijuana stocks is still a risky bet, though. If you’re up for the risk, investing in a marijuana stock index fund or ETF will provide broader exposure to companies in the industry than investing in a single company stock will. Just like buying the S&P 500 to invest in Tesla provides diversification and reduces your risk, the same is true of buying a marijuana stock index fund or ETF.
The difference is that companies in the S&P 500 span many industries and are usually much better established. These factors lessen the likelihood of large losses for an investor. Companies in the marijuana industry are relatively new and unpredictable. So if you’re going to invest in the weed industry, I’d recommend doing so in a separate account using your “fun money”.
“Fun money” is money you put toward your stock market gambles and are content with losing. Once you know how much money you need to invest to live your retirement dream and you’re on track to get there before retirement age, you can start a “fun money” investment account.
In this account, you can take huge gambles with your money. You can invest in marijuana stocks, bitcoin, Tesla company stock, smaller tech companies, whatever you think could be a big winner. Making incredible amounts of money on any of these investments is a definite possibility, but so is losing it all. That’s why I recommend these investments make up no more than 10% of your entire portfolio and that you only use your “fun money” to make them.
So what do weed, Tesla, and TLC have in common with Joe Biden? They’re all investments that should do well during the Biden presidency. Low interest rates should make taking the TLC approach and sticking to your long term investing plan a win, Tesla getting added to the S&P 500 gives you a less risky way to jump on the Tesla bandwagon and take advantage of their position in the clean energy sector, and if you’re looking to have a little more fun with your money over the next 4 years, the Senate makeup and bills currently awaiting votes should position the marijuana industry to grow during the Biden years.
So don’t stress about changing up your investing strategy now that we have a new president. The best stocks to buy now what Joe Biden is president are the same ones you’ve been buying. You should still invest for the long term, find smart ways to invest in market-leading companies, and make sure to have a little fun money.