As every UK investor is aware, the issue of Brexit has had a destabilising influence on the political and constitutional landscape, as well as on the future shape of our global trading relationships.
All the uncertainty can be unnerving but there are a few key principles to keep in mind that offer some help.
Of course, no investment approach is guaranteed to be successful, you should always bear in mind that the value of your investment can go down as well as up and that you may not get back what you put in.
- Diversify – “Don’t put all your eggs in one basket” so the saying goes and this is certainly good advice when constructing an investment portfolio. Diversification gives the best opportunity to perform across a variety of market conditions. Portfolios should be diversified across a range of asset classes for example shares, property or cash. As well as being diversified by asset class, a good portfolio will diversify by sector (e.g. manufacturing, pharmaceutical, financial etc) and geographical region.
- Take the right amount of risk for you – It is vital that you are invested in a portfolio that reflects your attitude towards risk and capacity to withstand losses. Contact your adviser if your circumstances change or you simply want to double-check that your investments remain suitable.
- Remember the goals for your investment – Think back to the reasons you decided to invest in the first place and what you hoped to achieve. Periods of short term volatility can be distracting and at such times it really helps to keep your long-term goals in mind and avoid panic decisions. Selling your investment when markets have dipped risks crystallising losses and could prevent you from benefiting during a recovery. For example, during the 2008/09 financial crisis, investors in the FTSE 100 needed to stay invested for fewer than 18 months from the bottom of the market to see a return to pre-crash levels.
- Keep Brexit in perspective – Brexit is just one of many influences on your investment portfolio and whilst it has sent ripples throughout the global economy the biggest impact has been at home. Trade tensions between major economies, conflicts overseas and the risks of a global economic slowdown all pose equal or greater threats to portfolios values. Brexit-induced weakness in sterling has even benefited some of the largest UK companies at times over the past three years. Although Brexit will undoubtedly have widespread ramifications domestically, it is by no means certain that a properly diversified portfolio will be negatively affected in the long term, whatever the outcome.