Legends Jack Bogle and Burt Malkiel agree on what investors shouldn’t do right now

UK voters shocked everybody Thursday by voting to break free of the EU, and hedge funds and day traders may jump on the opportunity to buy on the Brexit dip. But average investors might not want to make hasty decisions based on the Brexit vote. Or any decisions at all.

“This is not 2008 and the worst thing investors can do is to panic and sell out,” says economist Burt Malkiel, author of the classic finance book “A Random Walk Down Wall Street.”
 
Meanwhile, famed investor Jack Bogle echoed that statement with this advice: “Don’t do something. Just stand there. Don't be distracted by market opinions, stampedes and foolishness. So do nothing.”

Bogle says it’s vital to remember that if you got out during the depth of the 2008-2009 market collapse after the subprime meltdown or even after 9/11, you would have missed out on the huge market gains over the past few years.

"If someone tells you to get out of the market, before you do, remind them to tell you get back in," Bogle says.

On Friday morning, Bogle’s Vanguard Group sent a note to clients emphasizing that “it may take several years for the specifics of Brexit to play out.” The best way for investors to protect themselves against the market uncertainty is to hold a diversified portfolio, the note said.

Specifically, when it comes to the anxiety surrounding your 401(k), the best course of action may be to take no action at all.  "Don't be too aggressive. Balance, balance, balance,” says Bogle. “Stay balanced and with your 401(k). If this the first day you have it, do it now!" The make-up should generally be roughly two-thirds equity and one-third fixed income, according to Bogle.  

“The main point of investing in a long-term, diversified portfolio of index funds is to pull yourself out of the day-to-day tracking of the market that consistently leads a vast majority of investors, including professionals, to underperform over the long-term,” says Malkiel, the chief investment officer of robo-advisor Wealthfront, which has over $3 billion in assets under management.

He added: “Wealthfront makes sure [investors] understand that markets go up and markets go down and you cannot predict these movements.”

David Joy, Ameriprise’s chief market strategist, says he went into the vote underweight UK equities. On Friday morning, he held an ad hoc meeting for his team and they further reduced their exposure in the UK as well as in the eurozone.

“This is a bit unprecedented so it’s prudent to move to the sidelines,” he said, noting that he can’t recall a world event analogous to the surprise Brexit vote.

Especially for longer term investors, it’s still vital to view things on a macro scale, according to Joy. “If you’re a longer term investor I don’t think you have to do anything, at least right now. You also run the risk of making some irrational decisions if you move immediately after, or two or three days after,” Joy said. “A lot of trading that takes place day to day is really tactical, algorithm driven trading. You don’t want to get in the way of that and it might not be reflective of the underlying value of the assets.”

Amid this global market turmoil, the only logical thing to do right now may be to Keep Calm and Carry On.