The problem with ‘Brexit-Proof’ portfolios

Brexit continues to dominate headlines here in the UK and abroad. Big businesses are blaming it for falling profits, Boris Johnson is using it in an attempt to bolster his profile and there are warnings we could run out of food. There is also a growing concern for our economy and the stock market. You don’t need me to tell you how often Brexit stories are in the media, you can’t avoid them. You can be forgiven for not knowing where to look, let alone what to believe.

Again, it’s sensationalist media; nothing short of conjecture and scaremongering. Journalists are once again preying on fear to sell papers. The only thing that has indisputably happened is that the UK triggered a process; article 50. The only certain thing that will happen as a result; the UK will leave the EU in March. At this point in time, literally, everything else is speculation.

Brexit-proof

It’s unsurprising with the volume of media coverage, quite how often I get asked the effect of Brexit on pensions and investments. Some members of the fund management industry aren’t helping either, suggesting clients ‘Brexit-proof’ portfolios. Whilst some market volatility is widely predicted in the future anyway, there are infinite possible post-Brexit outcomes. In reality, fund managers don’t have a clue what will happen, nobody does.

Ignore the noise

The foundations of good financial advice, therefore, remain the same; identifying your circumstances, risk tolerance and objectives, then making regularly reviewed recommendations to achieve those objectives. Your financial plan remains as relevant as ever, no matter what the political climate. Attempting to second guess the market around such an unknown political situation is impossible.

Tory Brexiteer Sir Bernard Jenkin told BBC Radio 4′s Today programme that the Government were guilty of “gloom and alarm and despondency”. He continued; “It’s unnecessary and we will look back and wonder what all the fuss was about, a bit like the millennium bug”.

He was half right. The Government and the media are almost unanimously negative; Google ‘positive Brexit news’, there isn’t much there. But, this isn’t comparable to the millennium bug or ‘Y2K’. Brexit mania may be overhyped in a similar way, but the millennium bug was a known situation. There was a clearly defined problem, solution and years of planning to resolve it, entirely unlike Brexit.

When the referendum originally took place, it was widely speculated that if vote leave won, the stock market would fall off a cliff. There was an immediate drop caused by panic selling, but in reality, it has been quite the opposite since. You simply can’t accurately predict the unknown.

Historically, investment markets always fluctuate. There will be volatility, but time proves markets recover. After the financial crash in 2008 markets dropped dramatically, but recovered in around 12 months. Another downturn is somewhat inevitable, but trying to predict precisely when is impossible.

What can you do?

You have to stick to your financial plan; don’t be distracted by the noise! Ensure you have a realistic time horizon to invest and enough accessible cash to cover short-term needs whilst the situation blows over.

There’s nothing to gain worrying about circumstances you have zero control over. Spend your time being more effective and productive with things you can positively influence. Above all, ignore the doom mongers!

To help secure your financial future, together we should be making the most of financial planning opportunities, whilst mitigating risk. Remaining invested in a diversified portfolio is imperative, as history has proved. There will always be an event looming that may make you nervous, don’t get side-tracked by this one.

The value of your investments can go down as well as up and you may not get back the full amount invested.