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Brexit Fallout: what are the implications?

The implications for investors of the result of the UK referendum on EU membership will be played out over the months ahead. Although we understand investors’ concerns, you should not need to make dramatic changes provided you have a well-diversified portfolio.

UK investors who moved into cash ahead of the Brexit results on 24 June will have seen the FTSE100 make a remarkable and unexpected climb of around 12 % in the following month leaving them well out of pocket. Likewise, investors who moved into cash in March 2003 or March 2009 when the outlook has seemed bleak risked missing out on a double digit rise in the FTSE100 within the following few months.

The UK economy will be impacted by Brexit and uncertainty as to how this will show itself will prevail for some time.

Is there a safe haven? For some investors the solution will be to leave their money in cash but as we have seen this has dangers as markets can move upwards very quickly. Many investors have been lured by the so called ‘safe haven’ of gold but gold has its risks too.

The answer to unexpected events like Brexit and the subsequent ups and downs of stock markets is to invest for the long term and to diversify. Investing for the long term means not prancing and bailing out when investments fall. And diversifying means spreading your investments – not putting all your investment eggs in one basket.
Diversification will help protect your investments from the full impact of the volatility of the UK stockmarket. What’s more, with the pound falling against other currencies it means that your overseas investments produce an additional benefit for you when they are converted into sterling. In addition, all but higher risk model portfolios and discretionary funds will usually include a proportion of fixed interest investments.

If you are already invested in a model portfolio or use a discretionary fund manager you should relax because your investments are well diversified. If you are not currently using these please get in touch with Montpellier for a review of your investments.