Free for 90 days: Sign up now and get 90 days managed free after your first deposit. See offer details

Coming soon: our new one-on-one advice packages. Learn more

Now available: our new one-on-one advice packages. Learn more

Get your entire Smart Saver balance managed free for 3 months. Enroll today

Get your entire Smart Saver balance managed free for 6 months. Enroll today

Introducing Smart Saver: You could earn 1.83% with our low-risk investing account for your extra cash.* Learn more

Investing Basics

The Government Shutdown and Your Investing Strategy

Government shutdown? Debt ceiling debacle? Sound familiar? Take a pass on the current panic party, and relax knowing it will all be over (relatively) soon.

Articles by MP Dunleavey

By MP Dunleavey
  |  Published: September 30, 2013

The economic showdown in Washington over Obamacare is threatening to shutter the government and create a standoff over the debt ceiling.

Investors should brace for a steady diet of polarizing headlines...and sit tight until the markets rebound.

Here's the bottom line: When you consider the government standoffs of the last couple of years, you probably have nothing to worry about. Learn more about Betterment

Suddenly, the circus is back in town.

We’ve got the government on the brink of shutting down tonight at midnight, if Congress can’t agree on a budget. And we’re facing a looming battle over the debt ceiling in the coming weeks.

Putting aside the sinkhole of partisan politics, what does this mean for your money?

One thing you can count on: We’re heading into a volatile period—at least in Washington—and it’s tough to predict how long it will last. The most important thing for you is to avoid strong reactions and sudden moves that could make your portfolio vulnerable to downside risk, or (worse) lock in losses.

Your personal financial outcome, as the economic storm rises, depends on you: what you read, what you believe, and ultimately how you behave regarding your investments for the foreseeable future. Here, a survival guide for smart investors:

Dial back on news

In the past week, you’ve probably been exposed to a lot of opinions like this, from an analysis in Politico today: “If [the shutdown] goes three or four weeks or longer, then you do serious damage to the economy, triggering a recession and destroying consumer confidence in a way that could take years to rebuild.”

Brace yourself for a steady stream of dire predictions like this. But remember that they don’t necessarily reflect reality. Yes, the market pulled back during the so-called fiscal cliff of 2012 and the budget standoff of 2011 (remember those?), but it also recovered, as you can see right here.

Government shutdown
S&P 500, Sept. 2011 to Sept. 2013

More information doesn’t lead to better decisions. We tend to weight new information over old information, even if old information is objectively more important.

News is written to sell, and fear sells. Your job as a long-term investor is to not buy it. Rather than get stressed and make bad decisions, realize that this is political theatre, and is a hiccup in the big scheme of things.

Understand the circus

As an aid to your sanity, it may help to know what’s going on. The pitched battle over Obamacare is the real fight here. The bill that was passed by House Republicans this weekend would strip down key provisions of the healthcare law—but Democrats in the Senate have said they will stand firm to keep the law intact.

But as savvy investors know, this is politics, so you can expect a lot of brawling before either side will budge. Things might appear bleak if the budget doesn’t pass by the October 1 deadline (i.e. midnight tonight), resulting in a widespread shuttering of government offices. And it would be serious, especially for government workers, who would be furloughed). But a shutdown is relatively low-stakes compared to the October 17 deadline for raising the debt ceiling: i.e., the amount of debt or bonds the government can issue to meet cash flow needs.

Right now, in a last-ditch attempt to weaken Obama’s stance on the healthcare law, the Republican-controlled House seems poised to block the White House’s effort to raise the debt ceiling. But bear in mind, no matter how hysterical the headlines may get the last thing anyone really wants, on either side of the aisle, is to jeopardize the economic recovery by raising the specter of the U.S. defaulting on its debts.

Take your cue from the standoffs of the last couple of years—which took up weeks of air time and screen time—for nothing, ultimately.

Recommended Content

View All Resources
How We Use Your Dividends and Deposits to Keep Your Tax Bill Low

How We Use Your Dividends and Deposits to Keep Your Tax Bill Low

Every penny that comes into your account is used to rebalance dynamically—and in a tax-savvy way.

How’d the Market Do? That’s Harder To Answer Than You Think

How’d the Market Do? That’s Harder To Answer Than You Think

In taxable investing, your after-tax return—the amount you “take home”—is what’s important. Yet far too many investors focus on market performance. Let’s look at the difference.

Betterment’s Approach to Financial Advice: An Overview

Betterment’s Approach to Financial Advice: An Overview

Achieving your financial goals is only possible if you plan effectively. Saving enough, choosing the right accounts, deciding when you can buy a house or when to retire—all of these are essential decisions even before you build an optimal portfolio.

How would you like to get started?

Your first step toward a smarter investing future starts here.

Create a Betterment account

Go ahead and join the smart, modern way to invest.

See what we can do for you

Tell us a bit about yourself, and we'll show you the benefits of investing with us.

Get a free investing checkup

Help us get a sense of your investing approach and see how you could improve.

Transfer a 401(k) or an IRA

Move an existing retirement account into a Betterment IRA.

Download the mobile app

Enjoy the Betterment experience anywhere on the go.

Search our site

For more information and disclosures about the Betterment Resource Center, click here. | See our contributors.