It’s almost been a year since the UK made a majority decision to leave the European Union. Now that it has been confirmed that the Conservatives will continue to govern the country, the process of Brexit can well and truly begin.
Over the past year, there has been much speculation as to how Brexit will impact investments, particularly during the pound’s flash crash soon after the referendum. Some have warned against new investments, whilst others have a more positive outlook on what the future holds for the UK economy.
What can be said for certain, however, is that investors should be more vigilant than ever, in identifying, analysing and controlling any risks that threaten your investments. These times are uncertain and as such, it is imperative to have a risk management strategy in place to do as much as you can to protect your investment.
If you’re an investor yourself, looking for guidance on how to control risks and potential losses from your investment during Brexit, read on to discover some helpful words of wisdom, from financial risk experts, JCRA.
Be prepared for no guarantees
Even with a risk-averse government leading the country and the economy through the years of Brexit negotiations, there can be no guarantees as to what will happen in the aftermath.
Although it’s predicted that a) it’s unlikely that individual investors will be able to beat the market and b) periods of higher risks may potentially bring about compensation in proportion, it’s well worth assessing your investment strategy to highlight any potential risks that could come about, as well as how to deal with them.
Consider the market
There has been plenty of research conducted and data gathered on the predicted future risk within the UK stock market (looking at the levels of unexpected change within the market). This information reveals that while Brexit has caused an uproar across social and political aspects, it is suggested that there may not be as much of a change in market risk as we expected.
This rings particularly true when considering the changes in market risk during the recession of 2008. It’s quite surprising just how little the market risk has been predicted to change as a result of Brexit, considering the expected result of the referendum was to remain a member of the European Union. With that in mind, you would expect market risk to shift quite dramatically with the future of the unknown, however there is no saying that this couldn’t happen over time.
Whilst there is no urgent need to assess your portfolio’s risk profile as a direct result of the market risk, it’s recommended that you should at least consider it, as the rate of change in market risk is quite volatile. Having a thorough understanding of your investment risk profile and how these risks could be efficiently managed and controlled during market changes, can stand you and your investment in good stead throughout Brexit negotiations.
Consider your personal circumstances
Although the UK stock market currently appears to have been relatively unaffected by the decision to leave the European Union, there will be certain investments that may be impacted more than others. For example, UK companies that have a functioning relationship with other companies across Europe are bound to be greatly affected compared to other companies whose relationships reside solely in the UK.
Depending on which businesses or industry you have invested in, Brexit may have a rather significant impact on not only your shares, but your own personal life and finances, too. This is something that needs to be seriously considered over the course of the next two years or so, whilst negotiations go ahead between the UK and the European Union.
How can you determine how much of an impact Brexit will have on your own personal investment? In this case, the surprise decision to leave the European Union works in your favour, as you are able to see the impact Brexit since the referendum, as opposed to effective hearsay from beforehand.
Begin by considering any economic factors that your investment could be exposed to and do some research into the impact the Brexit decision has had on these areas. From here, you can keep up to date with the goings on with the negotiations and how these factors are being affected as the process moves forward. This will enable you to have a better idea of how much risk you can put on it, along with how to manage your equity and bonds, for example.
Keep on top of things
Keeping up to date with the goings on of Brexit negotiations is vital to being aware of how the change could impact your investment. Of course, there’s no telling what impact it could have in these early stages and if you aren’t an expert in the field, it’s understandable just how difficult a time it can be for you.
If you aren’t 100% sure of how to manage the risk and potential losses from your investment during Brexit, it’s well worth getting in touch with a financial advisor or financial risk expert, who will be able to offer professional advice on how to best protect your shares during this uncertain period of time.