Like many people, I have been up since about four o’clock this morning watching in fascination as this whole Brexit situation unfolds. Quite a few folks have been in touch since then asking what to do, so I thought I would get a message out as soon as possible: DO NOTHING. ABSOLUTELY, POSITIVELY DO NOT ATTEMPT TO TRADE THIS IN ANY SHAPE OR FORM.
Today, arguably more than any day in recent history, it is imperative that we all ignore the breathless, caffeinated / under slept talking heads and the febrile, nervy atmosphere – at least as far as our investments are concerned. The worst thing you can do today is panic and sell out of your investments.
Furthermore, unless you are an extremely knowledgeable and experienced investor or trader, you should absolutely not attempt to trade what has happened and monetise today or any of the next few days. That is the immediate, short term stance which I think will serve you best in the medium and long term.
Now let’s have an early think about what all of this actually means for you.
Well. Today – whatever savings or assets you have that are in sterling are nominally worth about 10% less than they were yesterday. As ever, however, this is in THEORY. Unless you actually sell any of those assets or convert any of your pounds into a foreign currency today, you won’t have actually crystallised this theoretical loss into a ‘real’ one. And the point here is that even the best currency traders will be disagreeing today about whether sterling will bounce back in the days and weeks ahead or fall even further.
A good buddy of mine who has a very senior role at a major investment bank in Asia reckons sterling and the UK stock market is a ‘massive buy’ today. Another friend of mine who is similarly senior at another leading investment bank in the US thinks the precise opposite. No one knows.
Of course, those of you who have implemented any kind of ‘own the world’ approach to investment need spend a great deal less time worrying about their finances today than people who have all their assets in pounds and / or in the UK stock market or gilts. Your gold holdings alone will be doing a great deal to support any fall off in those financial assets you have which might be affected by today’s news. Again – it bears repetition – investing in all main asset classes in all main geographical regions works through the economic cycle and days like this point up why this is such a good approach.
Allied to this – another key component of a ‘set and forget’ approach to investment that has a multi-decade track record of success is automated monthly investment into such assets. What happens in the next few weeks and months will no doubt bear this stance out too. For people with no big picture, top down, approach to investment – today’s news could potentially frighten them out of investments they may have made with likely disastrous consequences for their long term financial health.
For those of you who have got comfortable with investing regularly in all assets in all geographies: First, you will see less destruction in your wealth today than people who do not take this approach. Secondly, and possibly even more important, the fact that you will continue to make regular investments in those markets which see heavy falls in the short term, will very likely have a significant positive impact on your medium and long run returns.
There is a great deal more I would like to write about all of this and no doubt I will in the near future but – in the interests of broadcasting the above message as quickly as possible given I believe it is a very important one – I will sign off for now.
Whatever you do today and however you feel about Brexit, when it comes to your investments, please, please, please – DO NOTHING!
Andrew Craig is founder of Plain English Finance