At the time of writing this article, the UK feels like it’s hanging by a rather precarious thread. We are experiencing extreme uncertainty over our economy, our laws and our futures. Will we leave the EU with no deal? Will we reach a mutually beneficial agreement? Or will we actually end up staying and trying to surreptitiously sweep the whole sorry mess under the rug?
At the time of reading, you may be able to answer these questions for me, but I’m confident that the feeling of unease will still have us in its grip. And nothing quite sparks so many feelings of discontent than when your money, ergo your future security, might be at risk.
Whenever something like Brexit happens, there is always a significant risk to your investments. Any political shifts, disruptions, or sometimes even simple changes, have historically sent shockwaves through the financial markets, leading to volatility, unrest and, in some extreme cases, crashes. This impact is compounded if your investment portfolio has not been appropriately balanced to ride out the storm.
If you currently use a professional to manage your portfolio, I would hope that they are continually checking and adapting what you have in place, to ensure your money is performing as well as it can and making sure that you are not taking too much risk.
But what if this isn’t the case: what if you manage your money yourself, or if your current adviser is not providing you with what you need? If this is the case, you could end up taking far too much risk with your wealth, and your investments could be impacted so dramatically that your money could fall to a destructive level, all because of events like Brexit.
So, what should you be doing? We believe that the best way to protect yourself from political and economic turbulence, is to have a diversified portfolio. In the words of Nobel Prize winner Harry Markowitz, diversification is the only free lunch! And not just that: a diversified portfolio that is managed at a level of risk that you are comfortable with. Ultimately, just like the tides of the sea, markets will rise, and they will fall, but a diversified strategy can help you to shield yourself from the crashing waves.
The weather also hasn’t evaded turbulence of late, so a topical analogy for you: if you were to invest into an ice-cream company and an umbrella manufacturer, it’s likely you’ll make money in any British summer! None of us can see into the future and accurately predict what will happen with our investments (or even, possibly Brexit) but that doesn’t mean that you can’t put some measures in place to try to minimise any losses and reduce the amount of risk you take.
If you would like to discuss how you could optimise the diversification in your investments, want a second opinion on what you already have, or want to get your money working harder, so that it isn’t eroded by inflation, we would be delighted to help. Our expert team have over four decades worth of experience with investments and have helped many clients through times like ‘The Credit Crunch’ and ‘The Technology Bubble’.