When it comes to investing your money, it can be a roller-coaster ride at times due to the financial markets involved.
One positive comment here by an important politician or thoughtless comment from a Bank of England employee can cause havoc on the various markets. One big issue for UK investors from Warrington to Portsmouth that still looms large in 2018 is Brexit.
As we all know, in June 2016, the people of the UK chose to leave the EU in a democratic vote. This caused widespread panic in financial markets and industry at the time, and many fears still remain in business over how Brexit will pan out. Currently, negotiations are still underway with the EU to thrash out any deal that the UK will get as part of leaving. Many investors, however, fear a hard Brexit or no deal at all, which could impact their portfolios.
How has Brexit changed the landscape to date?
The main problem with the Brexit issue for investors to date is the uncertainty it has brought. Financial markets do not like uncertainty, which has seen them react badly at times to the UK leaving the EU. This was abundantly clear at the time of the Leave vote where Sterling fell heavily in the currency markets. This level of uncertainty is also bad as an investor as it makes it hard to predict what will happen in the future to your specific investments.
How will Brexit continue to affect UK investors?
As negotiations rumble on, the Brexit question will continue to cause waves for UK investors in the following ways:
- Uncertainty – as noted above, Brexit continues to cause lots of anxiety and noise that makes it hard for investors to make sound decisions. With the extra volatility that it also brings to the markets, it makes it tough to decide whether to hang onto certain investments or cash them in. With the future so unclear, investing is a tricky business.
- Pound weakness – in very broad terms, Sterling has been weak against its main rivals since Brexit was announced. This is likely to continue until the actual deal that the UK will get it is confirmed. Naturally, investors in the FX market need to factor in the ramifications of any such decision for their Pound-based currency portfolio. Other types of investments could see a falling Pound burn their value.
- Stock market issues – if you have any stocks in the FTSE 100 or other UK companies, then Brexit could well affect them in the future. Although they were not hit that much when Article 50 was triggered, future difficulties or bad news could see a dramatic fall in these share prices as a result.
- UK interest rate cuts – any savvy investor will know that the Bank of England will react in its own way to the news surrounding Brexit. The problem here is that what they decide to do will have an impact on your investments. An interest rate cut, for example, could hit certain stocks very badly.
- No deal reached – this is the one Brexit issue that has got everyone scared! If you have any kind of investment portfolio, then you must speak with a professional advisor to plan for this eventuality. In terms of your investments, if you do not, then it could be a disaster as no deal could see the value in your portfolio plummet overnight.
Currency trading and stocks still a good investment
All the furore surrounding Brexit may have you wondering if investing in currency or stocks at all is wise. The simple answer is that it is, but you do need to take extra care before parting with your money. When it comes to making trades on the FX market, for example, you need to be fully aware of how Brexit may affect the specific currency pairs that you like to deal in or when certain key Brexit information is going to be released. If you are new to this market, then use a forex trading for beginners guide to help you get fully up to speed.
By the same token, stocks are still worth looking at as an investment but with extra care taken over which companies you invest in. Certain companies or sectors will feel the Brexit effect more than others, so you need to factor in this when making your move.
Brexit can affect any type of investment
Although we have mentioned stocks and forex investments specifically, in truth the chaos that Brexit brings could affect any other kind of investment in your portfolio. Property investment may be at risk if Brexit affects the strength of the sector in the UK. Fine wine investment could be trickier when not part of the EU. The simple answer is to look at what you have invested in and plan for how you will mitigate any Brexit shockwaves.