Why Your Congressman Is A Better Investor Than You

The truth will make you sick. Technically it’s public knowledge, but I can tell you — it’s Congress’ dirty little secret.

Congress is rich. Unbelievably rich. And until just recently, insider trading laws didn’t apply to Congress.

I don’t know which is worse: The fact that insider trading was legal for some of our nation’s wealthiest politicians… or that Congress refused to do anything about it for decades.

That was, the legislation languished until 60 Minutes — one of the most-respected investigative journalism programs on television — dedicated a segment to the issue.

Among their findings: Nancy Pelosi (D-CA) and her husband have participated in multiple exclusive IPOs — including that of Visa. According to one report, Pelosi purchased 5,000 shares of Visa at the IPO price of $44. Just a couple of days later, when the stock was trading to the investing public, it traded at $64 per share. 

John Boehner (R-OH) bought shares of healthcare companies days before the “public option” was pulled from the recent Obamacare legislation. The removal of the public option proved to be a boon for private health insurers, making a significant sum for the Congressman’s investments.

The report from 60 Minutes led to a frenzy. And a few months after the story aired, the STOCK (Stop Trading on Congressional Knowledge) Act, which curbed insider trading by Congress, was signed into law on April 4, 2012. 

But why was it delayed for so long?

Apparently Congress was making too much money off the lax rules to do anything about it.

Now here’s why all this matters… 

More than half the members of Congress are millionaires. According to data from the Center for Responsive Politics — a nonprofit that examines the influence of money on politics — at least 268 of the 535 members of the 113th Congress need at least seven digits to disclose their net worth. By comparison, about 5% of American households are worth more than $1 million.

So much for representation “by the people.” 

Now, I know it’s tempting to let this kind of behavior send you into a fit of rage. 

And why, after all these years, would Congress change rules that have obviously helped them for decades?

As with most politics, public perception played a role. Thankfully, not only did the STOCK Act eliminate insider trading, but Congressmen and Congresswomen must now disclose their trades within 45 days after they happen. 

That means we have an opportunity to see exactly what our “representatives” are buying.

And I, for one, want to know.

Why? Because members of Congress have proven to be savvy investors. In a study cited by Barron’s, members of the House of Representatives beat the average stock market investor by 55 basis points a month. That comes out to an extra 6.8% per year.

It may not sound like much, but it’s actually pretty impressive. In fact, I know a lot of hedge fund managers who would kill to post that kind of performance year after year. 

With that in mind, I decided to dive in and see just exactly what the most popular investments are with Congress.

The results may surprise you, but not in the way you might think.

The most popular stocks held by Congress aren’t some “super-secret” investments. They aren’t exclusive investments only owned by those in Congress with some inside knowledge of a future breakthrough.

Instead, they’re the same large multinational corporations that make up the bulk of many average investors’ portfolios.

Take a look for yourself…


So what gives? If Congress’ most popular holdings are similar to what many average investors own, how is it that Congress can earn such high returns?

No one can say for certain, but my research has turned up a few clues. For one, if you look at the most popular stocks held by Congressmen and Congresswomen over the past decade, a lot of the same names show up each year.

This pattern suggests that many members of Congress are in it for the long haul — at least when it comes to the companies they invest in.

Individual investors, by contrast, are an impatient lot. These days, the average holding period for all stocks is about 3.2 months, compared with an average holding period of almost four years from 1926 through 1999.

But you don’t have to trade every 3.2 months to beat the market. In fact, your success actually increases the fewer trades you make and the longer you hold.

Just think back to 2008. That’s when the S&P 500 dropped 38.5%.

Anyone who traded in and out of stocks during this time probably lost a boatload of money in a hurry. That’s because when you hold stocks for a short period of time, your odds of losing money are actually higher.

Consider this: A study by mega-investment firm Oppenheimer showed that the S&P 500 has NEVER suffered a loss in a 20-year period (measured in rolling monthly periods). The study went back to 1950.

No wonder Warren Buffett has always said his favorite holding period is “forever.”

That’s my preferred holding period, too. 

Successful investing doesn’t have to be difficult. After all, if members of Congress can pull it off, so can you. That’s why my research staff and I have made our own list of “Forever Stocks” — companies that rank among the world’s greatest businesses in terms of scale, profitability and global reach. 

These 10 Forever Stocks have delivered average gains of 829% over the last decade, beating the S&P by a more than 7-to-1 margin. Some of the stocks in my list will be familiar to you — but I’m willing to bet there will be more than a few surprises as well. They’re the kinds of companies you can buy now — and potentially own for the rest of your life. If you’d like to get your hands on my list, simply follow this link.