18/06/19Brexit and your finances
Three years after the Brexit referendum, it’s still uncertain how and when the UK may leave the EU. With political turmoil, highlighted by the recent EU election and Theresa May stepping down as Prime Minister, you might be worried about how Brexit is and will affect your finances.
Held on 23rd June 2016, the Brexit referendum indicated that 51.9% of those voting supported leaving the EU. Whilst a majority, the vote was incredibly close, and it’s led to difficult negotiations, both in the UK and the EU. As well as the close vote, there are many different forms that Brexit could take and navigating a plan that satisfies a majority is, again, proving difficult. The House of Commons has voted against several Brexit deals put forward by Theresa May.
When the UK invoked Article 50 it was intended to start a two-year process with the UK leaving the EU on the 29th March 2019. The deadline has now been extended to 31st October 2019.
What does it mean for your finances?
As Brexit is uncertain and the long-term impact it will have even more so, you may have concerns about how it’ll affect your wealth and investments. Though it’s important to remember that Brexit is just one of many influential factors that are outside of your control. It may cause increased volatility, but there are things you can do to minimise the impact and safeguard your wealth.
1. Focus on your long-term plan
Short-term fluctuations in investment values are normal, it’s part of the investing process. However, it’s easy to panic when you see values fall and think you should take action. Here, a long-term outlook is essential. When you began investing, it should have been with a long-term goal in mind, perhaps to fund retirement or support grandchildren through further education. A long time frame gives you an opportunity to ride out dips in the market and hopefully secure returns.
With this in mind, the volatility UK stocks may be experiencing at the moment should be looked at in the context of the bigger picture. It can be worrying but, typically, holding steady and sticking to your plan is the right option.
2. Check the level of volatility you’re exposed to is appropriate
If the ups and downs of investments worry you, it may be time to reassess the level of risk you’re taking. There’s no one-size-fits-all solution for risk, it should depend on a range of personal factors. However, it’s important to recognise that the appropriate level of risk for you may change throughout your life. At some points, you may opt for a more cautious approach, but as your capacity for loss rises, you may decide to increase it, for example. If the impact of Brexit on your finances or potential falls in value makes you nervous, it’s a good idea to take a look at how much risk you’re taking and whether it’s still appropriate for you.
3. Diversify your investments
Whilst you consider risk there’s another area to assess in your current portfolio too: how diversified are your investments? By spreading risk across several different types of investments, you minimise the risk of significant falls in value as it’s less likely a downturn will affect all investments. Often, it’s asset classes that are focussed on here. But in the context of Brexit, assessing where geographically your money is invested, may be wise too. How much of your portfolio is invested in companies that are UK based, for example?
4. Keep an eye on performance
We know we said you shouldn’t focus on the short term. But that doesn’t mean you should ignore investment performance entirely. Keep an eye on how your portfolio is doing and ensure you regularly review it. Usually, we’d suggest a full financial review once a year or following big life events, this allows you to cut out some of the short-term peaks and troughs to see the overall performance.
A review also gives you a chance to spot opportunities. Brexit uncertainty might often be associated with values falling in the media, but that doesn’t mean it can’t bring opportunities too.
5. Speak to your financial adviser
If you’re contemplating making changes to your investment portfolio or financial plan in light of Brexit, getting professional advice can help you put the impact your decisions could have into perspective, looking at both the short and long term. If you’d like to discuss how Brexit, investment volatility or any other concerns may affect your finances, please get in touch.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.