Sian Thomas, chartered financial adviser at Hargreaves Lansdown, has reassured clients that the UK is still an attractive place to invest despite the uncertainty surrounding its imminent departure from the European Union on March 29.
In her latest blog for Hargreaves Lansdown, she tackled clients concerns on whether they should invest their money now or wait until after Brexit.
Thomas said: “It’s the length of time you’re invested in the market that really matters, not the timing of your investment.
“We think the prolonged uncertainty around Brexit has already had an impact on UK stocks, causing them to be deeply unloved. It’s very possible that the situation might improve in March when we should have a better idea of how things will look for the UK when we leave the EU. In the meantime the UK could be an attractive place to invest.”
She added that if clients are nervous about investing lump sums, then they can start by investing monthly, which spreads risk.
When quizzed on whether clients should sell UK holdings and invest overseas instead, she added that a diversified portfolio is the most important factor to bear in mind when considering long term investment.
Thomas said: “With any long term investment strategy diversification is absolutely key. At any one given time, there’ll be certain sectors or regions that are doing better than others. But it’s a very high-risk strategy to try and pre-empt this.
“We think UK companies will navigate Brexit, and as a whole, continue to make more money than they have in the past, just as they have through the whole of stock market history, though there aren’t any guarantees.
“The UK market is yielding 4.5%, a decent return for the patient investor prepared to ride out the ups and downs of their investments’ value. Remember yields are variable and not a guarantee of what you’ll get in the future. All investments and their income can fall as well as rise in value so you could get back less than you put in.”
This positive outlook was echoed by Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton, who said: “To be a successful investor, there are really three principles to master – optimism, patience and discipline. Naturally, depending on the next few months of Brexit, there may be some additional volatility and or short-term loss. But investments always carry uncertainty and this is where that third principle of ‘discipline’ is crucial.
“Periods of uncertainty are arguably when you actually make your money. This is not by clever trading but by simply sitting tight with a well-diversified portfolio whilst others around you panic and sell. We can’t say that there won’t be continued volatility nor that investment values won’t fall. But ultimately from an investment perspective, the world is likely to emerge relatively unscathed and in due course these current concerns will be forgotten about – much like the various concerns of previous years.”
However, Mel Kenny, chartered financial planner at London-based Radcliffe & Newlands, has argued that it is inevitable that investors will be nervous when it comes to the financial consequences of Brexit.
He added: “Brexit is naturally causing some paralysis in decision-making both at a corporate and personal level. People prefer to make investment decisions in calmer times so that they can feel a greater degree of certainty about eventual outcomes. This is a psychological trait, for what happens in the future has never been certain.”
Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation.
Further reading on this topic: