With the dust settling, it’s natural to wonder how the vote to leave the European Union will affect your investments. And whether, crucially, you should embark on a sell-off of your portfolio.
The best strategy, however, is to focus on the long term.
Leaving the EU is no quick matter, and the truth is that – despite many, many newspaper articles – you will see few changes in your day-to-day life for two years.
That is the time the UK has to renegotiate its trade agreements with EU member states. It is still far from clear what these renegotiated agreements will look like and how they will affect our economy.
The only thing certain about the result is uncertainty, which is something stock markets do not like.
We saw unprecedented volatility before the referendum and that is likely to continue as the UK debates with the rest of the EU over whether we end up with a ‘Canada-style deal’, a Norway-inspired European Economic Area, or something else.
Jeremy Askew, managing director of Town Close Financial Planning, says: “What we do know is that markets are sensitive. They don’t like uncertainty and they tend to overreact.
“In looking at the economic implications of the Brexit, firstly you have to accept that everything you read and hear is guesswork.”
Taking big decisions that affect your finances should not be done in the light of short-term events. It is always important to review your portfolio regularly and, if you have not done so for a while, it may be a good time for a spring clean.
A financial adviser can help you to check that your portfolio is sufficiently well-balanced to withstand turmoil and contains robust investments that haven’t lagged behind their peers in recent years.
The result could be a catalyst for this – provided that you don’t give way to short-term panic, but embark on a carefully considered strategy.
David Stone, Chartered Financial Planner at Mansion House Capital, says: “Brexit will take some time to wash through the system and as ever there will be winners and losers.” Stone believes hedge funds and other big investors will be highly active in the market and, while some will win, others will lose.
He adds: “Retail investors however should not be rushing to make such binary, high-risk decisions but rather in conjunction with their professional adviser remain focused on holding a risk-appropriate, tax-efficient and diverse portfolio of assets that is aligned with their long-term goals rather than fruitlessly trying to avoid short-term market volatility.”
An adviser will be able to show you the bigger picture – one in which there will be opportunities as well as challenges – as there always are within big periods of change.
Because an adviser has taken time to understand your finances, your ambitions and the needs of you and your family, they are better placed than any commentator to come up with a bespoke plan.
“The worst thing an investor can do now is panic,” says wealth manager Philippa Gee.
“This is one of those key times when having a professional clear head can help you look at the longer term and an adviser can help to keep you focused on the strategic picture, rather than reacting to every tactical potential move.
“If you get out now, when will you get back in?”
“If you have a well-balanced portfolio and decent cash reserves to see you through any prolonged downturn then you have nothing to fear,” adds Jeremy Askew.
Tailored advice could help you to achieve just that.