Well, it’s finally here. After months and weeks of noise about the Brexit vote — the referendum on whether or not Britain should remain a member of the European Union — voters in the UK are going to the polls. The polls will be open all day Thursday, the votes will be counted all night, and on Friday, we’ll know the result.
Should the “Brexiters” carry the day markets will almost certainly have a negative reaction. And this will present investors with an opportunity.
As we have explained, a British exit from the EU would inevitably require companies to make adjustments in their operations. This would be the case for those companies operating in the UK and Europe — including American ones — regardless of where they’re headquartered.
Furthermore, while each company within each industry would not be affected in exactly the same way, they would be impacted to a similar degree by the particular combination of adjustments each would have to make; none would be particularly advantaged or disadvantaged. The fundamental strengths and weaknesses of their businesses are what will continue to determine their long-term value.
If the outcome of the vote is for “Brexit,” the markets are likely to selloff sharply and — more importantly — indiscriminately. High quality companies will be on sale along with low quality ones.
How Investors Should Approach the Brexit Vote
As the vote approaches, review your wish list of investments: those that you would like to have but have been too expensive to buy. Review your target-entry prices — what you have decided, after thorough analysis, you would be willing to pay for them.
If your well-researched investment targets are sold down by others to your desired prices in the wake of this event, begin buying them. Accept that they may be sold down even further over the next few days or weeks, and keep averaging into them, until you reach your desired position size. It is difficult to think clearly in the middle of volatile market movements; therefore, think today, set your plan, and, should the market present you with the opportunity to do so, execute it.
That is the best advice I can give. Beyond that, I look forward to Friday and to finding out, after months of speculation, what the result of the vote will actually be.
For additional insights on potentially profitable long-term trends, view the full archive of George Evans’ GrowthSpotting series.
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Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Eurozone investments may be subject to volatility and liquidity issues.
Dollar cost Averaging cannot eliminate the risk of fluctuating prices and uncertain returns and does not assure a profit or protect against loss.
These views represent the opinions of OppenheimerFunds and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.