Brexit is costing people sleep.
On the night of the referendum vote, the fitness tracker Jawbone has revealed that British people slept 35 minutes less than usual.
For those of a nervous disposition, the last few days will have been rough. Establishment newspapers like the FT, the Economist and the Times are in meltdown mode. The normally unflappable morning crew on Radio 4 even sound a bit panicky.
I tried to escape for an hour with my favourite sports podcast, Second Captains. But they had Simon Kuper on, who writes books about football as well as a column for the FT. He hadn’t slept all night and all he wanted to talk about was Brexit. He darkly warned that Britain was just the first domino – the entire EU was next. Then the collapse of the euro. Then a global recession. Then he slagged off the Irish football team for a bit, and hung up.
A safe space
The Conservative Party has cracked. Corbyn’s shadow cabinet are dropping like flies. Scotland might leave. Northern Ireland too. Stocks down. The pound. Angry EU pols demanding a quick divorce. Mexicans wondering why the peso crashed 6%.
Well I’m declaring now: Risk and Reward is a safe space.
It’s not that I won’t be talking about Brexit (I will). But I’ll keep the hysteria and speculation to a minimum, at least until things get a bit clearer. I’ll stick to my brief: helping you look after your money, and showing you how to grow it.
And by the way, in case you missed it – I made a short video on the morning of the vote, interpreting the market’s reaction to the decision.
The first and most important thing
The first and most important thing to keep in mind is this: do not panic.
When markets take a tumble, private investors tend to lose out more than the professionals. Basically, they screw themselves over.
Here’s what happens: when bad news hits and the markets fall, private investors have a habit of selling their stocks. That’s an understandable reaction, but a mistaken one.
That’s because it’s impossible to know whether you’re “diving out of the way of a train”. You can’t know in advance whether this is the bottom of the market, or whether there’s worse to come. And let’s say you do sell all your stocks now. Now you’ve got a new problem – you don’t know when to buy back in.
In order to “time the market” successfully you’ve got to somehow know when the bad news is about to hit, and somehow know when the good times are back. Nobody can do this. (This neat game from QZ.com shows just how hard it is.)
The only certainty is this: every day you’re out of the market, you miss out on the general upward trend in stock prices.
Given all that’s happening around the world at the moment this might seem like an insignificant point, but I promise you that it isn’t. The tendency of private investors to try to “time the market” has been shown to cost them – wait for it – 30% of their investments by the time they retire.
Resist the urge!
Now I know, “don’t panic” isn’t the sexiest idea in the world. But first thing’s first.
Tomorrow I want to talk about the opportunities Brexit has thrown up. I’ll bring you some interesting ideas, and companies, which will benefit from an independent UK.