Currently, the UK economy is in relatively good shape. But the value of investments today doesn’t just look at how things are doing now, but where they might go in the future. This is why Brexit has weighed so heavily on UK investments over the last two years.
You might be sick of hearing the dreaded ‘B’ word, but love it or hate it, we wanted to provide you with a fresh update of where we are now, and what it means for the investment world and your Plan with us.
Where are we with Brexit now?
At the moment, the UK is still trying to negotiate a withdrawal agreement with the EU, which is the terms on how we’ll work together in the transition period. (The transition period is just the bit in-between saying ‘we’re leaving,’ and actually leaving).
The really important discussions will come during the transition period, where we agree new trade deals with other countries in preparation for life outside the EU (assuming that we do leave) after the transition period ends in December 2020. But the politicians haven’t got onto that bit yet.
The struggle to reach an agreement on how we will withdraw and lack of common ground between the UK and Europe is well documented. We covered it ourselves when we looked at the 5 most commonly asked questions on Brexit. While the current deadlock regarding the withdrawal agreement is worrying, it’s still not that surprising. After all, an 11th hour agreement was reached between the EU and Greece during their recent crises and many predict a similar last-minute approach between the EU and UK.
If no such agreement for the transition period is reached, there are three possibilities still on the table.
- We leave the EU on the 31st October with No Deal, or
- An extension of Article 50 is agreed on both sides to give more time for a deal to be reached, or
- Brexit is cancelled and we stay in the EU.
Not even Theresa May herself could tell us when or how Brexit will be resolved, but whatever the outcome, we’ll be well prepared from an investing perspective.
How are Wealthify Plans protected?
Many UK investors end up buying shares in UK companies, because it feels safe to them and is instinctive, this is known as home bias. At Wealthify, our strategy is different. Yes, we will be invested in some UK companies, but we also spread risk across other countries less exposed to Brexit. The investment lingo for this is being ‘globally diversified’. Our Plans can contain up to 80% non-UK investments, representing many global regions such as Japan, India and America.
In many of the likely Brexit outcomes, the Pound may tumble lower, which is bad news if your money is all sitting in a cash account. But, the good thing about being globally diversified is that you have exposure to different currencies like the US Dollar and the Japanese Yen.
Another thing we’ve done is re-examine how we access the portion of UK investments we do own. Larger companies are likely to be more Brexit-resilient, as they are typically less reliant on the UK economy having more global operations. We’ve recently rebalanced some of our Plans to ensure they hold a good mixture of medium and large UK companies.
Living in the UK, it’s easy to forget that, outside of Europe, most people are not that bothered by Brexit. With the exception of Ireland, it’s not even a key concern for many EU nations. If you’re a long-term investor with well-diversified investments, it shouldn’t be an issue for you either.
As a team of investing professionals, you can trust us to constantly monitor the situation. We’re well positioned now, but will act quickly and accordingly, as the situation develops.
Source: Wealthify and fund providers
Please remember the value of your investments can go down as well as up, and you could get back less than invested.