The pace of news about Brexit is rapid and so any form of communication can quickly become out of date, but we have drafted the information below from data we receive from the fund manager groups that we respect and recommend to our clients.
One of the key questions you might be asking yourself is “Should I stay invested?”.
The key points we would like to answer to this question are;
- Uncertainty – we all dislike uncertainty and any negative impact this has on our lives. Since the referendum the UK have experienced both. Times like these can lead investors to seek protection and sell out of the market while waiting for some certainty to return. Without a crystal ball we can’t know if this is the right approach or not
- Riding out the storm – Empirical research shows that, at its core, staying invested has the highest probability of gains in the majority of scenarios. In fact, the evidence suggests that being fully invested has a far higher win-rate than sitting in cash. Hence, for longer-term goals, the mathematical answer is to stay invested.
That said, we simply don’t know what the markets will do, nor how the exact proceedings will play out. In an attempt to control our own financial destiny, some may prefer to take the “no risk, no return” approach and sit in cash. This goes against most principles of investing for the medium to longer term as they often go against your own best interests of reaching your goals.
With that said, I equally appreciate that we must all sleep at night.
Getting slightly more practical, our role is to help you consider the knowable risks as well as any opportunity costs—including missed returns. In this regard, it’s important to consider that some of the strongest returns come from uncertain situations, as we last saw in 2009 and before that 2002.
The boost in the pound last week is another such example.
Its worth remembering that if your portfolio is diversified—locally and globally— different assets will be working together to improve the overall portfolio experience. It is vitally important that your investments have been mapped to your attitude to risk and tolerance for losses.
it is recommended that you hold cash holdings to help fund short term needs.
Long story short, I am here to have any conversation that will keep you on track. If the “stay the course” approach doesn’t resonate with you, please call me.
To the contrary, if you’re happy to keep your head down and hopefully ride-out the storm, then no action is required.
In the meantime, I’ll certainly be keeping a close eye on proceedings and will relay anything that we think is pressing
Source : Morningstar