How Will Brexit Affect My Investments?

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Image source: www.nutmeg.com

BY FAZAAD BACCHUS 

As many have seen in the news over the last two weeks, Britain decided the leave the European Union.

Britain joined the European Economic Community in 1973 and since then there has been no end to its division as to whether to stay or leave. With pressure regarding immigration policies, jobs and economic prospects, it finally came down to a vote or a referendum. The majority of Brits decided that it was time to leave with votes of 52% leaving and 48% staying, very, very closely divided. Following such a decision the Prime Minister also announced his decision to resign in the coming months. But nothing has yet been formalized as Article 50 will have to be invoked.

What can be expected after such an exogenous shock? Well evidently one can expect markets to fall and so they did the very next day. Investor confidence fell and once more there a heavy feeling as we remembered and got a flashback of 2008. Over the next three days local investors funds typically fell by -3 % and those who have portfolios in the upper limits became very wary. On the Global markets things were much worse, Japan’s Nikkei Index falling -7.9%, Hong Kong’s Hang Seng Index falling -2.9%, and China’s Shanghai Composite Index falling -1.3%. In Europe the drops have been more severe with many equity indices being down more than -10%. Can you imagine losing 10% of your total savings in just one day?

Is there a reason for fear or is there a good future after Brexit? Well over the next few months I believe that there will many periods of uncertainty as Britain begins to carve out its own economic policies acting in the best interest of its citizens. However, it does not carry with it the support of the European Union and sometimes may find itself on thin ice as it finds or searches for a firm footing. The extent of this prolonging is uncertain; so many investors might be pulling out, while Portfolio Managers might be going in, looking for opportunities. In a foreign language the word crisis” represents danger and opportunity, so definitely in this crisis there will be opportunists look for their opportunities.  

If you are invested in Global securities you may be thinking to sell and move your money into less volatile investments in this period of uncertainty, but you don’t know how long it will last and will markets rise faster than expected? It would be hasty to make a decision to sell off, unless you have spoken with your Financial Advisor and gone through your investment portfolio and assessed how balanced you might be. Certainly it may not be a wise idea to have all of your assets positioned in Foreign Equity, it may be better to be on the defensive side a little and protect your assets.

As per time of writing this article most of the losses two weeks ago have already been recovered, if you had sold then, you would have certainly lost money, not possible to recover. Without proper financial advice, you could have been on the losing side of an equation. Britain’s decision to leave will have its upcoming moments of uncertainties, but you do not have to find yourself going through the daily trauma of managing your investments. It is my opinion, anyone can sail a boat, but when the sea gets rough that’s when you need a good captain. Therefore, find a qualified Financial Advisor and save yourself the daily stress involved when it comes to managing your hard earned savings.

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