The most immediate impact of Brexit was on the pound and stock markets. The FTSE 100 fell on opening* but actually finished the day higher than at the beginning of the week.
The pound fell to its weakest point in years, resulting in the Bank of England announcing that measures will be taken to support the economy. Some analysts are predicting that interest rates are unlikely to rise again in the near future, and, if anything, will probably go down even further.
However, the market had been ready for the possibility of a Leave vote for a long time. It could be argued that those shares most likely to be affected had already lost value over the days and months leading up to referendum day, meaning that much of the impact was already priced into the market.
Points to remember
- The FTSE ended the week midway between the highest and lowest points of the previous 12 months*.
- Volatility (fluctuation in value) is a normal part of long-term investing, and long-term investors are usually rewarded for taking risks.
- Past performance is not a guide to future performance.
Protecting your investments
Investments can be held in different asset classes (i.e. cash, shares, bonds & gilts, property) and parts of the world (UK, Europe, North America, Japan, Emerging Markets).
To help cushion the effect of a downturn of any individual asset class, our approach is, and always has been, to spread investments across a range of holdings. In this way, when one area suffers a drop, there are other areas that will help cushion the impact on the whole portfolio. Similarly, when any area recovers, the portfolio will share in that.
Our clients’ portfolios are built to use different holdings in the right proportion for each client’s risk profile. A cautious investor will have far less in shares than an adventurous investor. Most portfolios will have a bit of everything.
Time for a review?
You may wish to review your portfolio with your financial adviser to check it continues to be invested appropriately, and remains suitable for your current circumstances and ongoing requirements. Your portfolio may benefit from some bolstering, or it may need to be realigned with your current requirements or capacity for loss.
If your money is all held in cash because you are nervous about investing, bear in mind that you risk earning earn little or no interest and inflation will eat away at your spending power. We always advocate that you keep enough cash to hand for emergencies and planned expenditure, and for that we can find you the best interest rate. However, non-cash investments have generally done better over time, although they don’t include the same security that you get with a deposit account.
Market falls can create opportunities, and, as Warren Buffet once said, “Be fearful when others are greedy, and greedy when others are fearful.” There is a lot of fear out there, but let’s not be too greedy. The main thing is, don’t be swayed by media hysteria surrounding Brexit, and Don’t Panic!
At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters, so please call us on 020 8655 8488 or 01403 288078 or email info@ monetarysolutions.co.uk
The information in this article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
The value of your investment can go down as well as up and you may get back less than you have put in.
*London Stock Exchange Figures: Opening Monday 20th June 2016 – 6021.10 Closing Friday 24th June 2016 – 6138.69 52 week high 6796.45, 52 week low 5536.97