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Nick Huber
November 2016.
47
How can I protect my own finances ahead of Brexit?
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There’s still a great deal of uncertainty about the Brexit process. Until Article 50 is formally triggered by the UK government and negotiations with the EU have concluded, investors are likely to experience relatively volatile markets. It can take up to two years for exit negotiations to conclude, so investors will need a great deal of patience during this time. Experts have a variety of beliefs about what will happen to the UK economy and global investment markets once the UK leaves the EU. In practice, nobody really knows for sure.

"Investment decisions should always be based on the level of risk an investor wants and is able to take with their money."

Investment markets dislike uncertainty, so with the terms on which Britain will leave the EU unsure, we do expect to see continued market volatility. Until the deal is concluded, it’s impossible to assess whether Brexit is good, bad or indifferent for the UK economy and businesses based here. In the meantime, there is a lot of speculation and much is attributed to Brexit, which helps to ramp up uncertainty and volatility.

Investors are best advised to remain invested for the long-term, diversify their portfolios and ignore the noise which will often surround periods of market volatility. Diversification can be achieved quite simply by investing in a range of different investment types, such as UK and global equities, bonds of different risk levels, and commercial property.

You can diversify by investing in different [investment] funds or by investing in a multi-asset or multi-manager fund, which does the work of diversification for you. Despite being traditionally ‘safe-haven’ investments, government bonds are relatively risky at the moment, due to low interest rates and quantitative easing. For nervous investors, the only real safe haven is cash, although this means accepting low returns which are probably eroded by price inflation.

Investment decisions should always be based on the level of risk an investor wants and is able to take with their money. Younger investors can usually afford to take a lot more risk with their investments, because they have time on their side to ride out short-term periods of market falls. The younger you are, the riskier the assets you can choose without worrying too much about being forced to sell investments when their values have fallen in volatile conditions. If you are closer to retirement or the time you need to access the investments, then you will want to take less risk.

The onset of Brexit should prompt investors to revisit their financial plans and ensure they have clear reasons for investing.