What investors should do now

After the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) fell 3.2% following Britain’s decision to leave the European Union, investors will probably be wondering what to do next.

Firstly, this is what investors should NOT be doing.

Panicking. Selling stocks indiscriminately. Taking trading cues from the direction of markets. Checking your portfolio every minute, or even every hour.

With futures markets predicting huge falls on US and UK markets, it’s highly likely we could see our market sell off even more next week.

That could mean more pain for your portfolios and more red ink.

The best thing investors can do now is…do nothing – with one exception – but more on that later.

Volatility will subside. Markets will resume their normal course of action. Fears will ease.

The European Union and the UK regulatory authorities and their respective governing bodies are likely to try and calm the markets and ‘do whatever it takes’ to ease their fears.

It could take months for the UK to trigger exit talks. Once that happens, it will trigger a two-year clock on negotiations. Anything could happen in that time.

Now is the time for long-term investors to exercise our patience and it will be a true test of our ability to stick it out as successful investors.

The one thing that investors can do is add to their existing holdings of quality companies – if they are cashed up that is. When high-quality companies – which would be unaffected by whatever happens because of a Brexit – are sold off, it’s an opportunity to buy shares at a cheaper price – like these.

  • CSL Limited’s (ASX: CSL) shares are down 2.1% at $106.75
  • REA Group Ltd (ASX: REA) share price is down 1.1% at $59.06
  • Cochlear Limited (ASX: COH) share price is down 1% at $119.95
  • Burson Group Ltd (ASX: BAP) share price down 2.1% at $5.24

For the rest of us, hunkering down and riding out the storm is the best course of action to take. Don’t look at your portfolios if you can help it. Tune out of the markets for a few days or a week or longer if you can.

Sell out now and you might miss further falls, but you could equally miss the recovery. Very few investors can consistently time the market successfully.

Foolish takeaway

Take comfort from the fact that many of the most successful investors will be doing nothing but sitting on their hands, while virtually everyone else is panicking around them.

Your portfolio will thank you – and you will be a better investor because of it.

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Motley Fool contributor Mike King owns shares of Burson, Cochlear Ltd., and CSL Ltd. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia owns shares of Burson. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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