As things stand, the UK is scheduled to officially leave the EU on 29th March 2019, deal or no deal. This fast-approaching departure, coupled with last-minute overexcitement, is creating a climate of uncertainty for investors, convincing many to sell. However, short-termism and selling without due consideration could damage your investing journey over the long-term. Here are some things to consider if you hold a Stocks & Shares ISA.
Time is everything: although it can be unnerving to watch the value of your investments fluctuate, it’s important to hold your nerve and think of the long-term plan. If markets drop further as a result of a no-deal Brexit and you sell, you will make those losses real. Holding on to your investments gives them time to potentially recover and even grow, over the longer term.
Keep calm and carry on: If you have a well-diversified set of investments spread across several investment types and global markets, take some comfort in the fact you’re doing the best possible thing to reduce the potential negative effects of Brexit uncertainty on your investments. Relying too much on any one market or region for good returns could land you in hot water, particularly during a period of persistently low market confidence such as we’ve seen since the referendum results.
We might have seen the worst of it: Since the EU referendum in June 2016 the UK went from being the fastest growing G8 country, to one of the slowest in economic term. In other words, the negative effect of Brexit on market and economic confidence was felt immediately and painfully. There’s no way to tell how the exit process will pan out and how smoothly, so we can’t be sure there’s not more pain to come for markets and investors alike. But Brexit is, at least – to borrow a popular phrase from ex US defence secretary, Donald Rumsfeld – a ‘known unknown’. Save for a major curve-ball being thrown into the withdrawal process, most of the possible eventual outcomes have been anticipated.
We’ve been here before: This isn’t the first time that markets have responded negatively to a major event. What we can learn from history is that save for war or major catastrophes, global markets have recovered from every major downturn since their inception, often significantly. In other words, this could simply be another storm to be ridden out and as any seasoned investor will tell you, it’s part and parcel of the process.
Nobody can predict what will happen after the 29th March, but Brexit is unlikely to affect the entire global economy for any significant length of time. The process is highly focused on the UK & EU economy, so a diversified global investment plan should feel limited effects of any economic fall-out of Britain’s EU withdrawal. Taking the long view, as all good investors should, there could even be a chance that Brexit in the medium to long term may benefit both UK and EU economies and provide some long-overdue relief for investors and markets. Only time will tell.
Facts in this blog are based on past performance and past performance isn’t a reliable indicator of future result.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
If you are unsure about whether investing is right for you, please seek financial advice.
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.