Often the inference of this question is that the current investment strategy is not or will not be fit for purpose post the UK exiting the EU.
The investment portfolios that we put together for our clients will cover all the four asset classes, broken down into shares both in the UK and overseas, cash, fixed interest and commercial property. Currently the maximum exposure to UK shares in our portfolios is 38% (this is one of the highest risk portfolios). Therefore, whilst BREXIT may affect UK equities (positive or negative) it only forms one, often small, part of our client’s investment strategy.
If you are considering taking a more defensive position with your investments i.e. by switching all or a large percentage of your holdings into cash, when do you reinvest? Attempting to correctly time when and how much you feed back into the market to purchase equities is likely to be tricky. As an example, many investors sought a more cautious investment strategy prior to the vote to exit or remain in June 2016, only to see investment markets pick up whilst their portfolios were left stranded overweight in cash or fixed interest.
In addition, consider that there is now so much information and research available to investment managers that events such as BREXIT have often been priced into the market. What insight or information do you feel you have that has not already been factored into share prices?
With the above in mind, reflect on whether you are investing for the longer term or are you speculating on the market? These are very different strategies. Our clients will be investing for the medium to long term (seven years plus) and in most instances we will have considered the merits of keeping an emergency or contingency fund for short-term cash needs.
There will always be events both bigger and smaller in nature, which will influence the returns that investors enjoy. Unless there is a dramatic shift in how the developed world operates post BREXIT, investing across the four major asset classes rather than retreating to cash is likely to provide you with a more financially rewarding outcome.
With this in mind, we would recommend retaining a well-diversified portfolio aligned to your attitude to investment risk and your ability to absorb a short-term fall in the value of your investments. If you feel that now is the time to review your investments and pensions to ensure that you are as prepared as you can be for BREXIT then do contact us at Wingate for an initial consultation.