Despite Brexit uncertainty continuing to undermine sentiment in the UK stock market, there are simple ways for investors to prepare for the months ahead and Brexit-proof their portfolios.
Investors can account for uncertainty in two ways. The first relates to when investment decisions are taken; the second to ensuring a suitable level of investment diversification.
In short, it is important to steadily drip feed your money into your investments rather than make any investment decisions that are based on a particular outcome, and to ensure that investments are well spread across both, geographies and asset classes.
Ed Monk, associate director for Personal Investing at Fidelity International, comments:
“It is understandable that UK investors are looking for safe havens in the market given the great uncertainty that Brexit still represents. Switching your investments wholesale to avoid one particular outcome, however, is rarely a winning investment strategy.
“There are a lot of diverging opinions and predictions regarding what the position of the UK will be in the coming year. While there may be stocks that are currently priced at what seems to be a ‘Brexit discount,’ there are also sure to be ‘value traps’ where the current low price is more than justified.
“One way to mitigate this uncertainty is not to bet on a particular outcome and instead, remain committed to investing a set amount on a regular basis across a spread of investments – from equities to bonds, to cash. By adopting this strategy you remove your in-built biases and assumptions and automatically, and dispassionately, invest more when prices are low and less when prices are high – a process known as pound cost averaging that reduces your losses in falling markets.”
Highlighted below are four funds that can help Brexit proof your portfolio:
Lindsell Train UK Equity Fund: Managed by Nick Train, this fund aims to capitalise on global consumer brands; owners of media or software intellectual and capital market proxies. The fund looks for undervalued, profitable companies whose brands and market positions allow them to ‘offer something truly unique.’ Companies such as Unilever and Diageo make up one fifth of the fund.
Fidelity Global Dividend Fund: Run by Dan Roberts, this fund invests in resilient businesses that can offer the prospect of long-term income growth and capital protection.
Global Dividend is well diversified and defensive, tending to perform well when recent hot sectors like technology do not. With a focus on high-quality, growing dividend streams, the fund is also designed to protect against rising inflation. It feels like 2019 could be this fund’s year.
Investec Global Gold Fund: Gold-related investments could also add a further element of stability. One way of doing this is to invest around five per cent into a gold fund, such as the Investec Global Gold Fund. This fund provides exposure to gold via a diversified portfolio of gold mining company shares.
Fidelity Select 50 Balanced Fund: Finally, the Fidelity Select 50 Balanced Fund, which offers a new one-stop way of investing across different asset classes and all around the world. This fund, managed by Ayesha Akbar, has navigated a steady course through 2018’s volatile markets. Ahead of another uncertain year, that stability is likely to remain a big attraction in 2019.