As it is now a little time since the unexpected results of the UK Brexit referendum became known, we thought it would be worthwhile to provide a brief update on what this may mean for investors & financial markets.
What does Brexit mean for me?
As it is now a little time since the unexpected results of the UK ‘Brexit’ referendum became known, we thought it would be worthwhile to provide a brief update on what this may mean for investors & financial markets.
The recent Brexit vote has sparked significant weakness in financial markets around the world and whilst it is an important economic and political event for the UK, in reality the underlying fundamentals of the vast majority of investments are unchanged. Financial markets around the world move in unison and what we are seeing is a kneejerk reaction to what is most likely to be a minor potential negative for the world economy in the long- term.
The political and economic effects of Brexit will not became clear for a period of several years. This has resulted in an immediate period of heightened volatility, with further uncertainty likely as the transition takes place. That said, markets continue to function. This event is fundamentally different in nature to the events of 2007 – 2008 which caused liquidity to freeze and market efficiency to suffer during the GFC.
It is also worth putting the recent share market movements into perspective. Markets were very strong in the first four days of last week when it was widely predicted that ‘Remain’ would win. This was followed by a sharp decline on Friday and then a recovery this week. In fact, the ASX-200 index closed yesterday above where it opened last week!
As we often say, one of the keys to successful investing is patience. Here are a couple of thoughts on managing your investments during periods of high volatility:
Hold the course: Selling investments as a reaction to short-term events such as ‘Brexit’ means losses become permanent and you may miss the potential for recovery down the track.
Diversification: Spreading your investments across a range of assets helps to protect your money when there is volatility in one asset class.
Know your risk appetite and your financial plan: Remembering your objectives and knowing your willingness to accept risk will help keep perspective during difficult periods.
If you would like further information on this topic, you may find this video from Magellan helpful:
Further interesting commentary from Platinum is also available here:
The information contained in this email is general in nature and is not to be considered as personal advice.
If you have any questions, please do not hesitate to contact us.
Craig Ayling & Shaun O’Farrell
Authorised Representative No 255802 & 329350
Australian Unity Personal Financial Services Limited
Australian Financial Services License No 234459
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