After months of anticipation, UK voters have decided – in a historic move – to leave the European Union some 43 years after joining its predecessor, the European Economic Community in 1973. The UK government, institutions and wider business community now have the task of addressing a multitude of financial, economic, fiscal and political implications and consequences.
Over this 43 year period we have experienced significant market events including; Black Monday, Black Wednesday, the Asian financial crisis, the Dot-Com Bubble, the 9/11 terrorist attacks and the 2007-2008 Global Financial Crisis. What we have learned during these periods is that although markets do fall, they have eventually recovered.
Investment does not come without risk and although this comes with the threat of downside it should also be remembered that without it there is no potential upside. Remember a loss is not a loss until actually crystallised.
Investment performance hinges on many factors out of our control, most notably the return on markets, but there are factors we certainly can control. These are the ones we deem the most important in creating and managing portfolios:
Here at Gresham Wealth Management, we believe asset allocation is the key driver to long term investment success. Different types of asset (i.e. cash, property, bonds, equities and absolute return) have different performance and risk characteristics. The aim of asset allocation is to blend the right mixture of assets so that over time the peaks and troughs of their performance balance each other out and effectively smooth the investment returns over the longer term. When we construct portfolios it is important that the performance and risk characteristics of these assets are tailored to an individual’s appetite and tolerance to investment risk.
Diversification of an investment portfolio across a variety of different low correlated asset classes and geographical regions should help to reduce the overall level of risk (variance or volatility of returns) compared with say a portfolio which only includes UK equities, without reducing its potential for growth.
Time in the Market
Rather than timing the market, we are big believers in time in the market. Timing markets over the short term is very difficult and extremely risky. Although there will be significant uncertainty in markets, we do not believe anybody has the ability to time the best entry and exit points for investment over short time periods. The important thing is time in the market; the stock market tends to reflect the overall growth and productivity of the economy in the long run.
As we did every working day before 23 June 2016, we will continue to monitor portfolios and we will be paying particular attention to the longer term impact Brexit will have on the funds we recommend.
For more information or to discuss any concerns or issues you may have in relation to Friday’s decision, please don’t hesitate to contact us.