The long-lasting affects the U.S. economy could feel from Bexit are still largely unknown. But they’ve still caused quite a stir among those investing in the market. Brexit describes the probable exit of Britain from the European Union.
The anticipation of the history-making moment has already resulted in some major upsets to the London stock market. The British Pound has also dropped to a 30-year low.
Britain makes up about a sixth of the European Union’s economy. Some financial experts have said a Brexit would be like the equivalent of removing states like California and Florida from the U.S.
That destabilization could affect the United States’ economy. The Federal Reserve in Washington recently cited the possibility of a Brexit as a reason to not raise interest rates.
So what does all of this really mean for your personal investment portfolio?
There is one piece of advice I can give in the midst of all the uncertainty. Don’t let your emotions and fears of the unknown drive your investment decisions.
While the current headlines on the news and radio may invoke some distrust and fear, pause for a moment before doing anything drastic like pulling funds out of the market altogether. That kind of move could be a much costlier mistake in the long run. Yes, the thought of your investments taking a plunge due to the affects of Brexit is concerning, but if you take no risks with your investments you’ll also reap no rewards. In other words, if you sell out every time you experience a loss, you’ll never have the chance to win.
So how do you teach yourself to take your emotions out of your investment strategies?
1. Focus on the long term.
You may be tempted to do something dramatic if the market takes a turn for the worst. But always keep the following piece of advice at the back of your mind: the best investment strategy is one that’s built for the long term.
2. Choose an investment strategy that fits your situation.
Sit down with a trusted financial expert that can guide you through an investment strategy you feel comfortable with, come what may. Based on history, you’re better off staying the course and keeping your investments in tact. You may be surprised at how quickly they can bounce back, and even soar to new heights in the wake of a period of struggle.
3. Keep your portfolio at arm’s length.
With smartphones and computer tablets at our fingertips, it’s easy to obsess over our portfolios, especially in the event of something like a Brexit, which could impact your investments. But in order to keep your emotions at bay, it’s a good idea to avoid checking on your portfolio more than once per week or once per month.
Instead, read some books by respected authors whose investments have stood the test of time.
It may seem more exciting to watch up-to-the-minute stock market reports, but if they invoke anxiety and lead to hasty decisions, it’s probably better to educate yourself on a deeper level than reading current news headlines.
4. Avoid risking too much on a handful of bets.
While it may seem fun to “play” the markets once the market settles, rather than flirt too much with risk, keep your portfolio diversified across large and small companies, domestic and foreign companies, and stocks and bonds. A financial professional can help you come up with the right mix.
The bottom line:
The key to smart investing is to remain consistent. Those who take the longest approach are often the most successful investors. Calm your emotions by using some of the above approaches and focus on the road ahead.