23rd June is a memorable day for the Britain as they chose to vote for independence from the EU nation. The Brexit event unfolds and gain momentum from the early morning trade where we see a lot of volatility movement across the stock market globally.
Almost all the sectors were hit by the unexpected reaction this morning and opportunities started to look open once again. My own portfolio were not spared as it dropped $15K from this morning losses. What should we as retail investors do then in such instance?
I think the worst thing an investor can do at this point is to panic sell their holdings given what is happening in the market. As investors, we should prudently review our position to see if there will be any such impact from the exposure of such events and then take prudent decision accordingly. Investors should in general take this even as an opportunity to add solid companies at a cheaper valuation, if any rather than panic sell.
Perhaps, it is during this time that we should remind one another of the virtue of patience. Kiplinger called this the general rule to remind investors to never allow yourself to be bullied and tricked by your own emotions into buying something that “cannot wait”. The fact is most things can wait and there isn’t the last train that is going down the track. Even if you had found a compelling situation where the company proves to be in a great position to buy, do pace out your funds accordingly such that you would still have the funds to take advantage of them should things get uglier from here.
Buying at the bottom or selling at the high is near impossible task for most investors out there. The hard truth is most of the buying and selling activities would range from within the standard deviation and it can be quite hurtful to see your stock goes up higher when you have sold or lower when you have bought. Even the best fundamental stocks out there could succumb to market decision when the economy gets rough and market will misprice itself. This is why pacing your fund allocations and activities is an important factor that every retail investors should consider.
For an opportunity loss it may seem difficult to endure, a permanent loss of capital is harder to absorb. Investors need to be reminded again that it takes a higher return to make a profit once the stock has dropped.
Now our mental is ready to be tested. Are you ready?