Investors should Brexit-proof portfolios ahead of June referendum
Now is the time for investors to consider ‘Brexit-proofing’ their portfolios, as the Bank of England and British banks are preparing contingency plans should Britain leave the EU after the June referendum.
The historic vote is nearly upon us. As such, investors should be looking into ways to Brexit-proof their portfolio in order to mitigate the effects of a drop in value of UK assets, in the event of a Leave campaign triumph on 23rd June.
The referendum and subsequent campaigning has generated a considerable amount of uncertainty, and we’ve seen many private sector firms shelving investments in light of the upcoming vote.
Indeed, should Britain exit the EU, this uncertainty and volatility is expected to increase. Sterling, UK equities and gilts will undoubtedly come under more pressure.
However, investors can prepare for the likely negative effects of Brexit on UK assets by concentrating their exposure on overseas investments.
In my view, it would be a wise, timely decision for investors to consider international stocks, bonds and possibly property.
That said, irrespective of Brexit, investors should consider rebalancing their portfolios.
An essential part of a well-diversified portfolio is covering various geographical regions. Those investors with a well-diversified portfolio will be in a better situation when it comes to mitigating risk during times of market turbulence, and also make the most of the inevitable opportunities such volatility generates.
As I have been quoted as saying in the media on many occasions, international investing being more of a risk is a total myth. In actual fact, the more diversified the portfolio – with an international coverage – the greater the reduction of overall risk to the portfolio.
In addition, it is also misunderstood that global investment options are just for the more sophisticated investors. This is absolutely not the case. There is a large variety of well-managed retail funds offering global stock market exposure, using many different approaches.