Keep some powder dry: Here comes the EU referendum!

So, just a month to go before everyone (well, probably not everyone) casts their vote and decides whether Britain remains in the EU. What will be the result? Of course, nobody knows for sure until it’s announced. The only thing investors can do is prepare themselves for either decision and act accordingly.

Remain on the rise?

Right now, it appears that the Remain camp is in the lead. The Telegraph’s ORB poll revealed that 55% of people wish to stay in the EU, with 42% likely to vote in favour of Brexit. So, despite the vast amount of headlines generated over the past few months suggesting that the race was neck-and-neck, its seems that voters are gradually finding more reasons to stick with the existing state of affairs. Should we all start to assume that the result of the referendum is a done deal? I’m not so sure.

Remember last May and those disastrous attempts to predict the outcome of the General Election? Back then, polls suggested that the Conservative and Labour parties were level pegging in the race to secure Downing Street. How wrong they were. In the end, David Cameron returned to office with a definite majority and the pollsters hung their heads in shame. Surely they couldn’t mislead us again?

Well, one of the hallmarks of a good investor is his or her ability to foresee and plan for all eventualities. While the probability of staying in the EU looks greater, it’s also possible that the gap could shorten over the next few weeks. Or the polls could just be wrong (again). As 23 June approaches, what’s a private investor to do?

Be prepared

First, stay calm. Regardless of what the pollsters say, the market is bound to show some volatility in the lead-up to 23 June. After all, markets hate uncertainty. Just look at the shares of leading housebuilders over the past few weeks. These dropped sharply in mid-April only to recover strongly in May. The prospective investor should learn to be more accommodating and welcome these periods of doubt with open arms. If Britain does remain in the EU, these shares will likely rise even higher at the end of June. 

Second, consider doing nothing at all. The next few weeks shouldn’t be a period of panic selling for Foolish investors. We can leave that to the fund managers who are judged on their performance over the last few years/months rather than a lifetime of investing. If you believe in the companies you own, stick with them. Better still, draw up a watchlist of companies you’d like to buy if they were offered at a discount.

Building a cash pile to invest is the next step. This point is worth stressing. One of the most irritating things an investor can experience is recognising an opportunity to invest but having insufficient funds to do so.  

Invest in companies, not opinion polls

Investing should be driven by your view of a company’s future prospects, not opinion polls. So which companies would I look to buy? Clearly, those with a global reach and operations in many countries and markets would be the most appropriate. Diversification across different sectors is also key. So don’t look on 23 June with fear; it could be a wonderful chance to load up on bargain shares.

Ultimately, all investments carry risk. That said, taking advantage of short-term share price weakness and buying large, resilient, quality companies is a sensible and likely profitable strategy.

Those interested in building a portfolio of such businesses could do worse than read a special report produced by the team at the Motley Fool. It's called 5 shares to Retire On and details a set of great companies that will survive (and probably thrive) regardless of which campaign receives the most votes towards the end of June.

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Paul Summers does not own shares in any companies mentioned. The Motley Fool has no position in any companies mentioned. We Fools don't all hold the same opinions but we all believe that considering a diverse range of insights makes us better investors.