We rarely apologize, but in this case it is necessary. We knew immediately, the minute we heard about the British pound crashing and stock markets all over the world crashing just because the British voted decisively to leave the European Union, this this was a rare buy opportunity.
Yet, we didn’t rush to our computer to make the post that you will be reading in just a moment. Why? Cowardice, pure and simple. Let this be a lesson to you all – trust your educated, well-honed instincts.
The day after the Brexit vote, IFO, after watching and celebrating all night (woohoo!!!) reviewed her portfolio holdings and cash position and bought some stock. But she didn’t post about her conclusions. What if she had been wrong? Would have looked like an idiot.
She didn’t have enough cash to make a big buy. And she might not have even if she had had the cash. IFO is a conservative investor. However, here is what she did. See what you think.
- She decided to buy. She knew she didn’t have much time – a day or two at most before the sophisiticated, but panicky, “professionals” came to their senses and got back into the market. During the first two days following the shocking and surprising vote to Leave, world markets lost what some calculated as Trillion Dollars in value.
- She reviewed only stocks she already held. IFO has spent YEARS giving advice and tips on how to select companies to buy stock in: dividend yield, number of years the company has paid dividends, quality of CEO, etc. There was no time to vet another company.
- She reviewed her cash position, did some quick Yahoo comparisons between companies she already held – big winners vs. not so big ones, looked at her portfolio to see who was down by the biggest percentage, picked a stock to buy.
- She divided the price into her cash position to see how many shares she could get. Then, she placed a trade. Done. That was a Friday. DOW down 600+.
We were pleased to see that our overall pre-purchase portfolio, while it did go down A LOT, did not fall as far, percentage-wise as the DOW. She calls this “beating the DOW!” and views it as a cause for celebration.
On Monday, the market was down again, but only by about half as much as on Friday. Oops! Correction starting already. Darn! But she did have enough cash to make one more purchase from her already-vetted companies, so made another trade.
On Tuesday, the market started back up. It’s up again so far today. World money managers have realized that the Brexit vote may actually be GOOD for them, for Great Britain, for the EU (more countries apparently wanting out NOW), and for the world.
What do we learn from this? Don’t listen to anyone or thing except your own gut. Whether it involves investing, or any other big decision you need to make.
Also, don’t second-guess yourself. You have your reasons, and if they turn out to be off the mark – too bad. You did the best you could with the information you had.
We’ll discuss why the Brexit vote is such a positive sign for world economies in our next post.