As we all now know, the UK electorate voted to leave the European Union last week.
In the coming weeks and months, there is likely to be economic instability as the government, markets and businesses come to terms with the decision. Stock markets don’t like uncertainty and there may well be prolonged volatility. At Callisto we thought it would be worthwhile reminding you of a few fundamental truths:
The media approach the markets from a different perspective.
It isn’t worth paying attention to what the media are saying about the markets and expect that information to be relevant to you. They have their own agenda and are certainly not addressing a post-Brexit climate from the point of view of long-term buy-hold-rebalance investors like you. Bad news and uncertainty are what they feed on. Now is not the time to abandon your investment philosophy and start with something new.
Don’t confuse your life and investment goals with the person giving advice in the media. This is probably the biggest issue for average investors looking for investment advice from the media. You are unique. You should have a well-thought out financial plan and a long-term portfolio to deliver your goals. Someone on TV isn’t going to know your situation and have your particular goals, requirements and time horizon in mind when they are discussing the markets. Context matters.
Tactics always sound better than having a plan in place and sticking with it through thick and thin. Market timing, investing in gold or commodities, getting defensive or searching through the rubble for bargains sounds interesting when things get dicey. It will feel better to do something instead of sitting on your hands and doing nothing. But trying to do these things on the fly because others may be doing them is not a sensible strategy.
Interesting doesn’t mean you should take action. You can follow the ups and downs in the market if you find it interesting. That doesn’t mean you have to act on moves in the market just because it piques your interest. Actions should be triggered by a major event in your life, such as retirement, not a political event that is beyond your control.
You don’t have to have an opinion about everything. It’s OK to say you don’t know what’s going to happen. No one’s going to think any less of you if you don’t have a clue about what is going to transpire in a volatile market like this. Hold your nerve and sit tight. You can still manage risk without having to try to figure out which direction the markets will go in the coming months.
It’s fine to have an opinion about what’s going to happen next. We’re human and Brexit will have wide-ranging implications. It’s fun to think about what’s going to happen in the future and make predictions. Just be sure to understand what you’re getting yourself into when you listen to the wide range of opinions from the financial industry and media during these kinds of market environments.