SEVEN POST-BREXIT TIPS FOR SMART INVESTORS

Investment & Wealth Advice




WHAT DOES BREXIT MEAN FOR YOUR MONEY?

So that's it. Britain has finally left the European Union (EU), three and a half years after the initial vote to do so. But what does it mean for your money?

Aidan Faik, Senior Private Banker, shares seven key tips for investors in 2020.

1. DON'T PANIC

Panicking is never a good idea and in this case it’s particularly fruitless. Britain may have left the EU but nothing has changed in practical terms as yet. We now have until the end of the year to do a deal with the EU. That won’t necessarily be easy, but it does mean that you still have plenty of time to plan ahead.

2. REMEMBER THAT THE ROAD AHEAD IS NOW CLEARER

Markets hate uncertainty. Since the 2016 referendum, the UK has had two general elections, three different prime ministers, and until very recently, no clarity on whether “Brexit” would even go ahead. Now however, the government has a strong majority, there will be no further elections until 2024, and Britain has left the EU. Regardless of how you feel about the outcome, the level of uncertainty has fallen. All else being equal, that’s a positive for markets.

3. REVIEW YOUR ASSET ALLOCATION

If you haven’t already done so recently, then now might be a good time to review your portfolio. Consider your “ideal” asset allocation – your goal for how to split your portfolio between equities, bonds and other assets in percentage terms. How does this ideal compare to the reality? If you find that your portfolio is heavily “overweight” in one area and “underweight” in another (for example, you want to have 50% in equities, but the proportion has risen to 60%), you might want to “rebalance” by adding money to the neglected asset class, or by taking some profits on the “overweight” part of your portfolio.   

4. BEWARE HOME BIAS

We typically think about diversifying by asset class - about how we should split our portfolio between equities, bonds, and other assets. However, you should also diversify geographically. Many investors are guilty of “home bias” – having too much money in their own nation’s markets relative to the size of that nation’s market in global terms. For example, UK equities account for little more than 5% of global stock market capitalisation. Yet for many UK investors, the UK market might account for 50% or more of their equity exposure, leaving them over-exposed to any UK-specific risks.

5. DO STAY INFORMED ON EVENTS THAT COULD DIRECTLY AFFECT YOU

Do keep abreast of rules changes or potential complications that could affect you directly. For example, Portugal is currently looking at making its rules on taxing pensions less generous for foreign residents. To be clear, this has nothing to do with Brexit – it’s more to do with domestic politics in Portugal and disquiet over its “golden visa" regime. However, it’s an example of the sort of news that is worth monitoring if you are thinking of retiring abroad, say.

6. BUT DON'T BE DISTRACTED BY HEADLINES

Brexit will continue to grab front page and inspire heated debate all through the course of this year, and no doubt beyond. So just remember that politics is not the same as investment. The future is always uncertain – the coronavirus outbreak being a very recent case in point. The best way for investors to deal with that is to maintain a sensibly diversified portfolio, one that can withstand the inevitable short-term shocks, while helping you to meet your financial goals over the long run.

7. REMEMBER - THE MARKET DOESN'T CARE ABOUT YOUR OPINION

You might think that Brexit is a disaster waiting to happen. You might think that it is a great opportunity. Either way, the market doesn’t care. Try to be aware of your own biases and try to avoid allowing them to influence your investment decisions. 

DO YOU NEED A HAND?

At Weatherbys Private Bank, we offer investment advice. As part of our service, we offer complimentary investment reviews to ensure you are in the best possible position financially as we enter the new decade.

When clients come to us looking to invest, we will occasionally recommend an active investment manager.  What we will always do is recommend to our client that they choose the solution which will keep costs down.  

For this reason, many clients find that a portfolio of tracker funds is the right option.  We help them create the right balance of tracker funds in their portfolio and then ensure that it doesn’t drift over time. And, true to the low cost philosophy, we don’t charge a penny for this service.

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Important information

The information contained in this article does not constitute financial advice or a personal recommendation.  Past performance is not a guide to future performance. The value of an investment and its income can both increase and decrease and you may not get back the full amount originally invested. The value of overseas investments will be influenced by the rate of exchange.