The Brexit sent a devastating tsunami across the European and US Markets. Indices dived and the British Pound collapsed. Not only that, the Brexit contagion is now apparently spreading across EU. Some of the member countries seem to have lost trust in the EU.
And because of that, I bet you are now worried of the effects that this may bring here in the Philippine markets.
For me, this will again be a good buying opportunity.
Why Brexit will become a good buying opportunity
Brexit will greatly affect the global markets and that includes the Philippines too. This might start massive sell-offs and will in turn drive stock prices down. When that happens, great companies will surely be on a fire sale.
When stocks go down during panic-stricken markets, remember this quote by Warren Buffett. According to him, it is during these times that we must;
“Be fearful when others are greedy and greedy when others are fearful.”
J. Paul Getty invested in oil during the Great Depression.
John Paulson made lots of money during the Financial Crisis of 2007-2008. So does Michael Burry and the founders of Cornwall Capital.
What does these people have in common?
These people took advantage of the fear and made them lots of money.
When people are starting to be fearful, then it’s the best time to start becoming greedy. Buffett bought shares in Washington Post and American Broadcasting Companies during the bear market of 1973-1974. His Coke stock was bought during the market crash of 1987 and become one of his famous investments giving him an approximate annualized gain of 11% for the past 27 years. He also bought Yum and H&R Block during the bear market of 2000-2002. These companies had a thing in common. They are;
- Bought during bear markets
- Have durable competitive advantages
This is the investment philosophy that I learned from him. This is a very simple concept but it’s hard to do because I observed that;
- Investors don’t have the courage to become greedy when others are fearful.
- Most long-term investors tend to be short-term oriented. They buy on good news and sell on bad news.
- Investors don’t have a system that can thrive to the bear and bull cycle of the market
If you’re a long-term investor and wonder why you’re not getting good returns on your investments, I think you should ponder the things I mentioned above. Always remember that great investors such as the persons I mentioned above built their enormous wealth betting on fearful investors.
Final thoughts
The panic that Brexit is sending throughout the global markets might drive the PSEi down. But since the experts say that the Philippine Economy is strong, I think this will be an amazing opportunity to buy great companies. Panics like these cause stocks prices to drop which has nothing to do with the business’ day-to-day operations. If you buy stocks that have good fundamentals and have a competitive advantage, they will pull themselves out of this bad news situation at a short time.
If the stock market really goes down these coming days due to the Brexit contagion, I’ll have to start being greedy again. I have a few list of stocks I will buy in case their prices becomes attractive. It’s a good thing that I have saved some buying power.
Happy investing!