When asked by a journalist what was most likely to blow governments off course, British Prime Minister Harold Macmillan responded “Events dear boy, events”. Well, we seem to be in the midst of some seismic geo-political events right now.
At the time of writing, we are approaching a rather important period of British history, with the set Brexit deadline fast approaching. Political biases aside, this has implications for all of us—potentially positively in an investment sense—although it does pose risks we can’t evade. Depending on the outcome of Brexit, Investment portfolios may be impacted (positively or negatively). Whilst we can’t control the Brexit outcome, we do think proper portfolio composition is appropriate ahead of the important impending events.
More descriptively, we must appreciate that some of the bad news is already priced in. In other words, the downside is anticipated by the market. That is, many investors are fearful and sitting on the sidelines, therefore the downside to UK assets should already be reduced and markets may actually respond positively to most scenarios. As such, we don’t think putting your money under the duvet is the answer, even if it can be tempting to do so when watching the parliamentary infighting.
We can attest to this statement in many ways, although always find the chart below useful. It essentially shows the importance of staying invested, where missing the best days in the market can eliminate your entire return.
Note: There were 7,915 trading days between 01/01/1988 and 31/07/2018. The above is for illustration purposes only, referencing the MSCI ACWI index data in US dollar terms. Past returns are not indicative of future returns. Source: Morningstar Investment Management calculation, Morningstar Direct data.
Financial Advisers discuss the concept of “Asset Allocation” a lot; this is how one’s investment portfolio is spread between different asset classes, such as equities, property, fixed interest securities and cash. An appropriate mix depends on one’s individual views toward risk and circumstances; this is something I would encourage all investors to review on a periodic basis.
We appreciate this is a concerning period (for all of us). Perhaps many people regret the position we now face, however that doesn’t help us to achieve your financial goals.
After all, we are in the business of guiding you from A to B (and beyond, hopefully), accepting some risk where the opportunity for return is thought to be superior. We can’t possibly know what is ahead of us regarding Brexit or any other world events for that matter, but we can stick to the principles of sound financial planning and view developments opportunistically.
So, I’ll sign off with another famous line, this time from poem “If” by Rudyard Kipling, that I feel is particularly pertinent right now “Keep your head when all about you are losing theirs”.