One Big Lesson I Learnt From Brexit

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.

Brexit news

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:

STI Chart

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!

What’s Happening?

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.

Going Forward..

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!

Aloysius Lee

Aloysius has been investing in Singapore Equities from the age of 18 and is still madly enthusiastic about it. He strives to sharpen his edge while guiding others along the way to snowball their way to financial freedom!

2 thoughts on “One Big Lesson I Learnt From Brexit

  • July 3, 2016 at 9:24 AM
    Permalink

    Hi,

    When GFC came in, I also think that it’s so far away and it’s not going to affect us. But when reports of the toxic assets starts to spread globally, I realised my lack of fear was due to ignorance rather than a more realistic assessment of what’s happening right now.

    So my question to everyone is, how do we know that there’s really nothing to fear or we’re brave and reckless (on hindsight) because we didn’t read/know enough?

    It’s not so easy to say for sure that this or that event wouldn’t affect our shores. I didn’t sell anything during this ‘crisis’ but knew a few who did to trim down their exposure should something bad happen. Did they panic sell? No, it’s a measured response to a risk that is unknown. I wouldn’t be so bold to assume that I know everything, hence it’s a hedge against further market downturn and to lock in some profits.

    The more I know, the less I know. That I know for sure.

    Reply
  • July 3, 2016 at 4:14 PM
    Permalink

    Building shake, run first, talk later, don’t procrastinate and guess. No harm to do this. You never know it is the start of a 2008 all over again. And to follow the stock go down and let the market capture your capital is no wise either. Why not get out and buy at one of the bottom to profit, we may not buy at the very bottom, but it is sure better than following it down and up and make nothing.

    Look at the previous crises, those who stay needed some 10 years to see them just to break even. And if this happen to a counter, it is even more urgent to sell and wait it out. We don’t know what happen till it is over. Big boy are selling for a reason, they are closer and know first hand. We small fry know nothing, do you want to wait?

    I know value investing is good, but to stay and get whack, then wait for recovery is not wise either. Every vestment should have a stop loss, same with relationship. You can’t go on living with some one insist of having control over you and make you suffer till you drop dead, that is not LOVE. That is stupidity at best.

    I would sell first, but not out of fear, but of safety. And to say it is over is still early, remember 2008, the market does not go down in a straight line, I believe brexit cause lot of stresses on the financial and banking sector waiting to give more surprises and later more bad news will follow. Wait for another 3 to 6 months before you count it more or less over.

    I believe end of 3 quater will be time to tell. Good luck to all.

    peter

    Good luck
    peter

    Reply

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