Below is a message from The Motley Fool's Chief Investing Officer, Andy Cross, which is being sent to all Motley Fool members. This is how we approach volatile markets.
Dear Fools,
It was a simple question with a ton of weight behind it: "Should the United Kingdom leave the European Union?"
And yesterday, more than 30 million citizens of the U.K. surprised most of the world by answering "yes" in a 52% to 48% vote.
What was once thought of as unlikely, if not impossible (they wouldn't actually leave, would they?), became reality, and investors around the world reacted swiftly. In England, the benchmark FTSE is down 3% this morning. Germany's benchmark DAX is down 6.5%. Now, futures for the S&P 500 are off about 3%.
Hedge fund managers, traders, and speculators are heading for the hills (or trying to) in the face of economic and political uncertainty. What does this mean for the future of the E.U., our largest trading partner? Will other countries leave? Is another recession on the horizon?
The questions are unending. The answers are unclear.
So now what?
Keep calm and invest on
Today and in the days ahead, we'll probably see extreme movements in stock prices. Don't let your emotions get the better of you. Don't overreact. Markets will always swing wildly during times like this in the short term, driven by traders, algorithms, and leveraged hedge funds facing margin calls.
But you share our long-term Foolish approach. You're a true investor in businesses that create value for customers, employees, partners, and shareholders, and you're looking out years, not days or months. For Fools like us, this turmoil comes packed more with curiosity and opportunity than with fear.
In fact, times like these are often the best times to be an investor. They are terrible times to be a speculator or a trader using leverage -- but great moments of opportunity for Foolish, long-term investors.
Here's some historical context for you. On average, stocks have increased three out of every four years over time. And every 11 months, as columnist Morgan Housel has shown, stocks on average fall 10%. He's also shown that missing the best market days are devastating for your long-term returns. Most importantly, he's reminded us that the 20 best days in stock market history were during the worst depressions and financial crises.
Not panicking when the market moves is critically important to your long-term investing gains.
What we're doing
First, we maintain our wits, knowing that there will always be times when a panicky market tosses our favorite companies aside like the proverbial baby with the bathwater.
Second, the Fool advisor teams are paying close attention to what's happening in the markets. We don't have a crystal ball about what the Brexit will bring (and we're not sure anyone does), but we're confident that wonderful businesses will prove themselves through thick and thin. Those are the businesses we want you investing in.
Most importantly, we're looking at our stocks and portfolios in the context of staying invested for the long term. We hope you are, too.
Fool on,
Andy Cross, Chief Investment Officer
