Brexit Jit­ters

Un­sur­pris­ingly a com­mon ques­tion our clients ask dur­ing their an­nual re­views is ‘What ef­fect will Brexit have on my in­vest­ments and fu­ture plans?”

Berkshire Life - - Business -

Area­son­able ques­tion to ask and a dif­fi­cult one to an­swer. We are not blessed with a crys­tal ball, or at least one that works.

The ques­tion of course will of­ten re­ally mean, ‘is there some­thing ahead that may af­fect my in­vest­ments in a man­ner that might cause me some fi­nan­cial dif­fi­cul­ties?’ That again is a dif­fi­cult ques­tion to an­swer but we un­der­stand the sen­ti­ment.

In­vestors want dif­fer­ent de­grees of cer­tainty. Those who want ab­so­lute cer­tainty shouldn’t in­vest in any­thing other than de­posit ac­counts, al­though, if his­tory re­peats it­self the buy­ing power of money on de­posit will di­min­ish due to in­fla­tion.

Those who can­not af­ford to lose much money are likely to have more con­cern about stock mar­ket volatil­ity than those who could af­ford to lose much more. This topic forms a big part of the fi­nan­cial plan­ning work we do. Ev­ery­one is dif­fer­ent.

But back to Brexit. Google the sub­ject and you will find ev­ery view that you could imag­ine. On the whole the press seem to be rather neg­a­tive about Brexit but neg­a­tiv­ity can be sen­sa­tion­alised and sells more news­pa­pers.

The fund man­agers we speak to typ­i­cally have a rather dif­fer­ent view. Stock mar­ket prices are driven by cur­rent facts and fu­ture spec­u­la­tion. If fu­ture spec­u­la­tion (they call it ‘anal­y­sis’) pre­dicts some bumpy times then the prices to­day will be de­pressed. Un­sur­pris­ingly, fund man­agers have mod­elled all man­ner of Brexit out­comes and will only buy in­vest­ments when the price is right ac­cord­ing to their fu­ture spec­u­la­tion. What this amounts to, is that much of the fu­ture con­cerns about Brexit are al­ready priced in to the mar­ket. The key here is:a) When the ref­er­en­dum results came out the UK mar­kets fell quite markedly for a pe­riod of time. The value of the pound also fell against other cur­ren­cies which made in­ter­na­tional com­pa­nies more valu­able. Thus, di­ver­si­fied port­fo­lios (strangely enough, like the ones that we man­age) that have in­ter­na­tional ex­po­sure were re­mark­ably re­silient through this pe­riod. b) If your in­vest­ments are blended to match your view of risk and you are in­vest­ing for the longer term then weath­er­ing any storm has been proven to be the best strat­egy. Re­search reg­u­larly con­cludes that try­ing to time the mar­ket is rarely suc­cess­ful.

So there may be Brexit bumps, but I don’t think it will be Ar­maged­don. We’ve no crys­tal ball but heed the above and we reckon things will be OK.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.