FINANCE

BREXIT: WHY INVESTORS MUST NOW ‘THINK GLOBAL’ TO MAXIMISE AND PROTECT WEALTH

Nigel Green

By Nigel Green, founder and CEO of deVere Group

The Brexit vote outcome continues to send shockwaves throughout the world.

Nigel Green

Nigel Green

The markets had, by and large, expected the Remain campaign to win.  As such, unsurprisingly, the result had a quick and dramatic international impact.  The FTSE 100 fell more than 8 per cent immediately after the ‘Leave’ victory; the Dow Jones suffered the worst two days for U.S. stocks since August last year; the Johannesburg Stock Exchange fell nearly 5 per cent; and the Hang Seng Index fell by some 1,000 points.

In addition, the euro slid against the US dollar and the pound slumped to its lowest level in 30 years.

However, days after the Brexit result was announced, and the dust was settling, markets began to rally.  For instance, the FTSE, the UK’s blue chip index, regained all ground lost since the shock outcome, and sterling strengthened against the dollar and euro.

Of course all this seesawing in the markets impacts your wealth.  So what to do?

One of the key themes now that all investors must do is this: Think global.

There are two facets to this.

First, investors should think global when it comes to their portfolio.  Many investors should be considering a rebalance anyway, regardless of Brexit.  Investing across geographical regions is one of the fundamentals of a well-diversified portfolio – and those with a well-diversified portfolio are best-placed to mitigate risk in times of market turbulence and best-placed to take advantage of the opportunities.

It is a myth that investing internationally is riskier.  Indeed, the greater diversification that is secured by going global, the greater the reduction of overall portfolio risk.

It is also a misconception that international investment options are exclusively the domain of sophisticated investors. This is not true. There are many well-managed retail funds that offer global stock market exposure, using a wide variety of approaches.

And second, investors need to think global in terms of other geopolitical risks.  A possible Brexit has been driving global financial markets for a couple of months – and it continues to do so.  But keep an eye on other important geopolitical factors that will influence markets and therefore impact your finances. These include China’s economic growth, the possibility of Brexit contagion as other countries seek to exit the EU, the U.S. election, the failure of negative interest rates in Japan and the Eurozone to stimulate sustainable recovery, and the Fed’s nervousness over the U.S. economy.

In these times of increased global volatility, a good fund manager will prove to be invaluable to help capitalise on the enormous opportunities that will be coming along and to sidestep the risks.

Thinking global is imperative to create, maximise and safeguard your wealth.

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