With all these drama in the market, there was one big lesson I learnt from Brexit. Shut out the noise. Look at a quick search I made on ‘Brexit’, and you’ll see fear painted all over the internet with headlines that would easily scare investors out of their rational minds. To the untrained eyes, all they see is fear and losses. The trained sees the opportunities in crises.
While the news portrayed a very negative image of the stock markets, the results were not as devastating despite being “the worst one day drop ever”. Yet despite all of these, look at how the STI reacted:
As though nothing even happened. Investors call themselves long-term, yet when they look at the stock market charts, they look with a 1-year, 3-year, 5-year horizon. Some become crippled with fear while others are left with indecision. Rather than focus our efforts on trying to decipher what all these Brexit means to our portfolio, which we realise nothing much has changed (at least in Singapore’s context), go spend that effort reading through annual reports instead of headlines. Shut out the noise!
People are finding reasons to scare themselves. They choose to look at market cycles, saying it’s an overdue bull run because theoretically it should happen every X number of years. Brexit is a classic case of people trying to find the catalyst to spark off that belief. Market falls because of a self-fulfilling prophecy that doesn’t make sense, and I’m glad investors these days are beginning to become more rational. Let’s be honest, how many companies in Singapore are linked to UK at all. Granted, some are, like ComfortDelgro, but so many others don’t even have link to them! You could say that globalisation and trade will affect them in some ways, but honestly, I don’t think the impact is significant enough to warrant a sell-off.
We will see more events happen for sure, like the US Presidency, and many more to come. But what have we learnt? Shut out the noise. Most of the time the events don’t affect us. Think rationally. When we focus on buying good quality businesses with a margin of safety, we can shut out all the noise and sound-proof our rational minds. It’s not wrong to be aware of what is going on around the world, lest we appear naive. It’s wrong however, to allow news headline to plant the seed of fear in us and cripple our mind.
There’s a lot of opportunities out there for us to grab and we can get them even cheaper when irrational people sell from fear and rational people profit from fear. So stop being so immersed in the headlines and start going back to the annual reports! Shut out the noise!