There are three things investors need to do in the immediate aftermath of the UK’s decision to leave the European Union, affirms the boss of one of the world’s largest independent financial advisory organisations.
Nigel Green, founder and CEO of deVere Group, which has $10bn under advice, comments as the FTSE100, the UK’s leading stock market, fell by more than 8 per cent earlier today but has finished the week up more than 2 per cent.
He states: “Britain’s decision to drop the Brexit bomb and abandon its four decades of EU membership has, of course, been fuelling turbulence in the global financial markets since even before the outcome was officially announced this morning.
“Against a backdrop of reeling markets and uncertainty, individual investors are, understandably, feeling nervous about their future financial security.”
Mr Green continues: “There are three things that investors need to do now as we enter into a new era.
“First, for the vast majority of investors the message is clear: Keep calm and carry on. Hasty decisions are typically not the wisest ones. There remains too much uncertainty around at the moment to take strong bets on any particular asset class, sector or region.
“The market volatility may indeed be an indicator of storm clouds ahead, but equally, and perhaps even more likely, it will present a positive buying opportunity. But we need to wait for the fog to lift a little first.
“A buy-and-hold strategy of quality multi-asset funds is as valid a strategy today as it has ever been.”
“Second, focus on the longer term. Yes, the political landscape has changed overnight, but your financial objectives have not.
“Markets are, by their very nature, turbulent but stock market performance is fairly predictable over the longer-term – they usually go up. For this reason, investing in equities is recognised globally as one of the optimum ways to accumulate wealth over long periods.
“All too often even experienced investors focus on the short term too heavily in times of market volatility of the kind we are now seeing, and there are many disadvantages to this.
“For instance, a short-term investment strategy involves considerably higher risks, compared to investing over a longer period. Other pitfalls of a short horizon include that investors can often sell a quality investment too early due to over focusing on short-term valuation metrics.
“And third, 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.”
Mr Green earlier concluded: “In these times of increased 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.”