Fear and uncertainty caused panic and ‘Brexit fears’ in the markets last Friday after the vote. The Media (bless them) lined up industry experts to tell us how the markets are going to crash and Armageddon will again rule the UK.
According to Media and press, DIY Investors who use a well-known direct investment website complained extensively using social media, that they were unable to sell stocks due to the high demand of use on the web site. They were all selling at the same time.
All I can say is ….why?
At what point did the DIY investors wake up in the morning to see the Brexit result and then think ‘I need to sell my shares today, that’s not what I expected’.
At what point did the DIY investors think that if markets are on free fall, that some broker somewhere is going to buy the shares. Shares are bought, only if there is a purchaser the other side. They will buy, when the stock price stabilises not when it’s in freefall, you cannot choose your price.
The Brexit result, either way had been built into the share price. Markets have traded pretty flat for the last 2 years and the FTSE 100 index was higher at the end of Brexit Friday than back in February, when Mr Cameron declared the date of the Brexit vote.
So why are there Brexit Fears?
With 60 million trades a day around the globe, why did the DIY investor have to sell in mid turmoil? Did they think they knew more about the global market situation then all the other trader’s in the World or are they easily led by the media who are trying to create programmes and newspaper articles to keep their readers or viewers engrossed in their coverage of events? Brexit fears sell!
Who’s to know, but what we do know is that these DIY investors do not have a strategy they can fall back on in times of turmoil. Trying to panic sell on the day markets are predicted to fall, I admit is by definition a plan, but not a plan I would suggest is very good for your health or a plan that creates wealth over the longer term.
Playing ‘beat the market’ is no difference to playing poker, playing the roulette wheel or betting at the bookies. Can you imagine betting on a horse and its winning down the back straight and you think ‘I am making big bucks today’ only to see it slow up and begin to be overtaken by the chasing gallop down the home straight. If you ran back to the bookie and said ‘can you buy my bet back off me please, I am going to lose money’ and then the rest of the losing punters crowded up behind you asked the same question, what do you think the outcome might be?
Putting your money on any specific stock is gambling and gambling is geared towards the house winning and you losing. You may be the winner on occasions (and perhaps a big winner at times) but the house wins more than you do.
The investment houses are the same, you buy their product and the price goes up you win or down you lose. In the meantime you lose anyway because the house is taking large charges from your investment each year, so why are they worried. They just need to keep you as a customer.
If you enjoy the ride and the stress and enjoy moaning when you can’t sell your stock on the day its falling and you don’t mind paying a fee to the investment house for the privilege of being a member, then you must continue to burn your wealth. It’s your right to do so, but please don’t moan in the media, the wise investor does not feel sorry for you.
Why not consider another way to invest. A way whereby the investor has a strategy for the longer term, a strategy that says if the markets in one part of the world are negative then this creates a positive market somewhere else in the world that I will be able to take advantage of. Instead of playing ‘beat the market’ why not consider having an investment strategy that ‘buys the global markets at the lowest cost,’ then sit back watch all the those who think they know ‘panic’ knowing your investment strategy over the longer term will create the wealth you seek.
No panic, no stress no Brexit fears, no ulcers. Thays just the way my clients and I like it.